The real GDP growth for Bangladesh economy now showing signs of some improvement and may range from 2.6 to 5.6 per cent in FY21, the World Bank says in its updated forecast.
But it hinges on the pace of vaccination, extent and duration of mobility restrictions and how quickly the world economy recovers, it said on Monday.The lender says Bangladesh’s economy is showing nascent signs of recovery backed by a rebound in exports, strong remittance inflows, and the ongoing vaccination campaign
The report titled “Bangladesh Development Update – Moving Forward: Connectivity and Logistics to strengthen Competitiveness,” was launched through a virtual media briefing.
The lending agency said growth will be supported by a recovery in manufacturing as export demand strengthens, a rebound in construction supported by accelerating public investment, and robust service sector growth as the vaccination campaign progress.
After being severely affected by the COVID 19 pandemic-which slowed growth and for the first time in two decades slightly reversed the poverty reduction trend-the economy is recovering gradually.
Country Director Mercy Tembon chaired the event while World Bank’s senior economists Bernard James Haven and Matias Herrera Dappe made two separate key-note presentations.
“Despite the uncertainty created by COVID-19, the outlook for Bangladesh’s economy is positive. Much of the pace of recovery will depend on how fast mass vaccination can be achieved,” said Mercy Miyang Tembon.“The World Bank will support a resilient recovery, helping Bangladesh achieve green, smart, and inclusive growth,” she assured.
Inflation is projected to remain close to Bangladesh Bank’s 5.5 per cent target, and the fiscal deficit is projected to remain at 6 per cent of GDP, the WB said, adding that the current account deficit may decline on strong remittance inflows and a recovery in exports.
In reply to a question as to why the WB projected a wide growth range instead of a specific number, Tembon said the growth number depends on many other things which are happening now.
She explained if the inward remittances to Bangladesh continue its robust and resilient growth, then growth in this fiscal year could be around 5 per cent.
Over the first half of FY21, the World Bank said factories reopened and exports rebounded. However, the economy faces elevated risks in the context of the ongoing COVID-19 pandemic.
In Dhaka and Chittagong, the country’s two largest cities, recent surveys pointed to a recovery in the labour market in the first half of FY21.
With a gradual restoration of livelihoods, food security in poor and slum areas improved. In Chittagong, the percentage of adults working had returned to pre-COVID levels by February 2021.
When asked what are the challenges the country would face during this difficult time of COVID-19, Mercy said the problem is not about the challenges, rather what the country would do to go forward.
“We need a series of strategies that will emphasis on green, resilient and inclusive growth and development,” she added. The WB country director said there is a need for a lot of efforts to address malnutrition, stunting and better health care for all. Besides, she stressed the need for accelerating digital technology, improving the local supply chain, logistics, connectivity and biodiversity.
The country’s long-term key priorities should be Increasing government revenues, diversifying exports, resolving financial sector vulnerabilities, rebalancing urbanization, and improving the business climate, the WB suggests.
Its special focus should be on improving connectivity and logistics to strengthen competitiveness. It can cut logistics cost by 25 per cent while enhancing exports by 20 per cent, it added.
This can be achieved through a system-wide strategy to increase logistics efficiency; improve the quality, capacity, and management of infrastructure; improve the quality and integration of logistics services; and, achieve seamless integration of regional logistics services. Risks to the outlook remain elevated. A fragile global economic recovery could dampen demand for RMG products and limit job opportunities for migrant workers. The COVID-19 pandemic has exacerbated financial sector risks stemming from nonperforming loans and weaknesses in bank governance and risk management.
“The COVID-19 pandemic has led to an unprecedented global recession,” said Bernard Haven, World Bank Senior Economist, and co-author of the report. “Protecting households affected by the pandemic remains an urgent priority, while structural reforms can help accelerate the recovery.”
Answering a question, Bernard said the lockdown would have an impact on employment and for this the government would have some additional programme to support the affected people.
Tembon said the biggest asset of Bangladesh is its people and for this, they need to be healthy, educated and also have good livelihood.
Responding to another question about the government’s measures to protect the poor during this pandemic situation, she said Bangladesh did extremely well when the pandemic hit and it had also launched a good number of stimulus packages to keep people remain employed despite the shocks.