Tuesday, 28 March, 2023

Bangladesh’s GDP growth to slow down to 6.5pc: IMF

  • Staff Correspondent
  • 1 February, 2023 12:00 AM
  • Print news

International Monetary Fund (IMF) has projected a subdued GDP growth of 6.5 percent for Bangladesh in FY24, which is below the government's target of 7.5 percent.

Bangladesh's GDP growth is likely to stay below pre-pandemic level high of 7.9 percent for the next several years until FY27, says an IMF release. 

In FY27, the growth may pick up again to 7.4 percent. But before that, several critical indicators will see a few years of downward trends.

“Despite an air of optimism, gloomy days will linger for a few more years before the pall lifts,” the IMF says.

Although in a positive sign, the IMF expects inflation to fall from 8.9 percent in FY23 to 6.5 percent at the end of FY24, reaching 5.5 percent in FY26, this cooling-off period will be driven by dampening consumption as well.

According to the IMF, consumers who are already stretching pennies will spend even less in the next two years.

Private consumption will fall from 7.6 percent of GDP to 6.5 percent in FY24. In FY25, this will fall even lower to 4.1 percent, rising from FY26.

Despite the ongoing dollar crisis, Bangladesh's foreign exchange is expected to improve to $34.2 billion in the next fiscal year, up from the latest fiscal's $30 billion. It will reach $46.4 billion at the end of FY26.

It will cross the $53 billion mark at the end of FY27.

However, government projections on forex reserves for the next three fiscals are a bit higher – $38.14 billion for FY24, $41.04 billion for FY25 and $48.29 billion for FY26.

Besides, remittance inflow is expected to experience a downward trend from the next fiscal. IMF projection for FY24 is 4.9 percent, for FY25 4.6 percent, FY26 4.4 percent and for FY27 it is 4.1 percent.

Remittance inflow for the current fiscal year now stands at 5.1 percent.

Meanwhile, other key economic indicators such as – current account balance, trade balance, service balance and income balance – will continue to deteriorate in the next fiscal. Still, things are to improve from there on till FY27.

As per the IMF estimates, the country's current account balance will go down to -4.2 percent from the -3.2 percent, trade balance to -8.4 percent from -7.6 percent, and service balance to -0.9 percent from -0.8 percent.

The IMF yesterday approved a loan of $4.7 billion for Bangladesh, calling for ambitious reforms to achieve more resilient, inclusive, and sustainable growth.

Bangladesh is getting about $3.3 billion under the Extended Credit Facility (ECF) and the Extended Fund Facility (EFF) and about $1.4 billion under the Resilience and Sustainability Facility (RSF).

With this, Bangladesh became the first country in Asia to receive a loan from IMF's RSF.