The Asian Development Bank (ADB) has lowered its GDP growth projection for Bangladesh to 6.8 per cent for the current 2021-22 fiscal year from its previous forecast of 7.2 per cent.
The Manila-based lender made the latest projection in its Asian Development Outlook (ADO) 2021 Update released on Wednesday.
For its below pre-pandemic level growth forecast, ADB cited re-escalation of coronavirus disease (COVID-19) infection rates in Bangladesh or major advanced economies as the main risk, which it said may clip domestic and external demand.
Inflation is expected to slightly edge up to 5.8 per cent and the current account deficit to narrow to 0.6 per cent of GDP in FY 22, an ADB release said.
“The government’s policies for saving lives while protecting livelihoods underpinned the recovery process in Bangladesh, making it one of the few countries in the world sustaining commendable economic growth in recent difficult times,” said ADB Country Director Manmohan Parkash.
“Prudent macroeconomic management and efficient implementation of stimulus measures and social protection programs have helped. Continued efforts for job creation, quick vaccination, and improving domestic resource mobilization will further accelerate the recovery process,” he added.
Appreciating recent initiatives in the areas of financial inclusion, and expanding social protection, Parkash said sustained reforms to increase business competitiveness, foreign investment, export diversification, skills development, and technology adoption will stimulate private sector investments and hasten economic recovery.
The central bank’s expansionary and accommodative monetary policy is expected to support the projected growth while keeping inflation contained. Strong remittances will stimulate private consumption.
Inflation is expected to edge up to 5.8 per cent in FY2022 reflecting a recovery in economic activities. Continued implementation of the increased fiscal and monetary stimulus measures is expected to create inflationary pressures, said the ADB.
A good crop outlook, consumer caution and underutilized production capacity should mitigate any upward pressure on prices. Domestic administered prices for fuel may cushion the impact of increased crude oil prices.
ADB has reoriented its program priorities in Bangladesh emphasizing health and social protection, skills and rural development, water and sanitation, and the finance sector since the onset of the COVID-19 pandemic in early 2020.
Projects, programmes, and technical assistance worth over $1.8 billion have been approved for social protection, job creation, vaccine procurement, and emergency management of the COVID-19 pandemic.
In its 48-year-long partnership with Bangladesh, ADB has mobilised over $44 billion in loans and grants, including co-financing, to help bring better infrastructure, public services, and social development outcomes to the people of Bangladesh. ADB’s current sovereign portfolio in Bangladesh has 51 projects with around $12 billion.