Bangladesh economy is likely to post a healthy 6.4 per cent growth at the end of FY22 supported by continued recovery in exports and consumption, according to the latest forecast of the World Bank (WB).
The lender made the fresh projection in its latest South Asia Economic Focus report titled Shifting Gears: Digitization and Services-Led Development projects unveiled on Thursday.
But more growth will depend on how successfully the country carries out its vaccination campaign which is somewhat on the back foot now as Bangladesh is only ahead of Afghanistan in South Asia when it comes to Covid-19 vaccination.
In terms of real GDP growth at constant market price, Bangladesh will be only behind India and the Maldives in South Asia which is predicted to see 7.1 per cent average growth in 2021 and 2022.
The Maldives will be leading the region with 11 per cent growth this year, while India will be at the second position with 7.5 per cent growth.
India’s economy, South Asia’s largest, is expected to grow aided by an increase in public investment and incentives to boost manufacturing, while Maldives’ growth will be driven by a recovery in the tourism sector.
South Asia’s recovery continues as global demand rebounded and targeted containment measures helped minimize the economic impacts of the recent waves of COVID-19. But the recovery remains fragile and uneven, and most countries are far from pre-pandemic trend levels, WB said its twice-yearly regional update.
“While short-term recovery is important, policymakers should also seize the opportunity to address deep-rooted challenges and pursue a development path that is green, resilient and inclusive,” he added.
COVID-19 has left long-term scars on the region’s economy, the impacts of which can last well into the recovery. Many countries experienced lower investment flows, disruptions in supply chains, and setbacks to human capital accumulation, as well as substantial increases in debt levels.
The pandemic is estimated to have caused 48 to 59 million people to become or remain poor in 2021 in South Asia.
As countries build back, they have a chance to rethink their long-term development models. With the emergence of new digital technologies, South Asia has an opportunity to shift gears from a traditional manufacturing-led growth model and capitalize on the potential of its services sector.
The role of services in the region’s economy has been increasing amid rapid technological change and the accelerated structural transformation of global economic activity in response to the pandemic.
The adoption of digital technologies makes services more tradable, enables services to increase the productivity of other sectors—including manufacturing--and creates new markets.
Some South Asian countries are increasingly providing business and professional services that add value to manufacturing and play a key role in global value chains.
“Countries in South Asia have a strong comparative advantage in exporting services, particularly business processes and tourism, whereas they have struggled to break into manufacturing export markets,” said Hans Timmer, WB Chief Economist for the South Asia Region.
“To realize the potential of the services-led development, the region needs to rethink regulations and establish new institutions to support innovation and competitiveness,” he added.