The Asian Development Bank (ADB) has lowered Bangladesh's growth forecast for the current fiscal, with the second wave of Covid-19 posing risks to economic recovery.
The regional lender, however, anticipates a sharp economic recovery in the next financial year, notwithstanding the Covid-19 headwinds. The projections were reflected in the Asian Development Outlook (ADO) 2021 report released on Wednesday.In January this year, the Bangladesh government revised its gross domestic product (GDP) growth projection for the current fiscal to 7.4 percent from the earlier 8.2 percent, considering the Covid situation in the country.
However, ADB has anticipated a drop in GDP growth this fiscal due to the onslaught of the Covid-19 pandemic.
“The economy was showing signs of recovery with higher remittances, exports and other indicators, but the recent surge in the pandemic and the lockdown are likely to trim our GDP growth projection of 6.8% for fiscal year 2020-2021 by at least one percentage point,” ADB's Country Director Manmohan Parkash said.
He said that the government managed the first wave of Covid-19 in 2020 well as the stimulus measures and economic policies have largely been effective.
“The ongoing pandemic is an opportunity to undertake further reforms in social protection and health sector, improving competitiveness of the private sector, reducing cost of doing business, diversifying exports, and developing skills,” Parkash said.
“Expanding social safety nets, enhancing investments, creating employment, ensuring mass vaccination, and improving the health sector are critical actions for achieving the Eighth Five-Year Plan goals,” the ADB Country Director said.According to Parkash, future economic growth will depend on recovery in domestic economic activities fuelled mainly by implementation of stimulus packages, strong inflow of remittances, and rebound in global trade amid projected growth in major export destinations.
"Current account balance is expected to cross into surplus of 0.7% of GDP in FY2021, contributed by remittance growth. The main risk to this growth projection is further surge of Covid-19 cases and delayed availability and supply of vaccines both globally and domestically," he added.
The ADO 2021 says that continued strong remittance inflow is likely to support domestic demand with growth in private consumption. Remittances from workers overseas increased by 35.1% in the first nine months of FY2021 due to the 2% cash incentive offered by the government and reduced documentation requirements.
Private investment is expected to pick up as moderate growth in private sector credit improves confidence. Higher public investment is anticipated as the government expands capital spending.
Inflation is expected to reach 5.8% in FY2021 from 5.7% in FY2020 as price pressures are increasing from higher public expenditures to implement stimulus measures and a rise in global food and fuel prices due to pick up in global economic activity, according to the report.
The ADO 2021 points out that a move towards universal health care is critical to ensure inclusive and sustainable development. Health care in Bangladesh can improve with more public funding and effective administration, it says.
"A contributory public social health insurance scheme can help achieve universal health care. To enhance inclusion and high enrollment, participation should be mandated for all with subsidies targeted to lower-income people. Substantial strengthening of domestic resource mobilisation will be needed to mobilise increased funding for healthcare."
ADB has already provided $650 million in loans and $7.23 million in grants for managing socio-economic impacts of the Covid-19 pandemic and supporting quick recovery. The organisation is also processing two programme loans of $500 million each and a $940 million loan for the government’s Covid-19 vaccine programme.
In its 47-year-long partnership with Bangladesh, ADB has mobilised around $40 billion in loans and grants, including cofinancing, to help bring better infrastructure, public services, and social development outcomes to the people of Bangladesh.
ADB’s current sovereign portfolio in Bangladesh has 49 projects with around $11 billion. ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members -- 49 from the region.