Bangladesh will witness higher inflation in 2022 as the implementation of various measures to combat Covid-19, including the disbursement of stimulus funds, has added pressure to the recent hike in fuel prices, according to the Asian Development Bank (ADB).

The government's decision to increase the price of diesel and kerosene resulted in the rise of transport costs, which either directly or indirectly affected all sectors.

However, the ADB kept its FY2021-22 economic growth forecast for Bangladesh unchanged in its latest supplement of the Asian Development Outlook 2021.

The Manila-based development lender trimmed its annual growth projection for Bangladesh to 6.8 per cent through an update in September, which reflects the

impact of virus containment measures reinstated at the start of the year.

In April, the ADB had projected 7.2 per cent growth in the country's gross domestic product (GDP), up from a 5.47 per cent provisional estimate in the last fiscal year, while the government set a similar target.

And in its latest report, the ADB said Bangladesh's exports and imports grew more than expected thanks to a surge in global demand for clothing.

"Faster import growth widened the trade deficit but the growth will be supported by private investment with imports of capital machinery and raw materials for garments," it added.

South Asia as a whole is forecast to expand less than projected in the ADB's update for 2021, reflecting a modest downward revision of the GDP growth rate in India, with manufacturing now expected to grow slower than anticipated.

In contrast, other economies in the region have benefitted from higher global demand and the rebound of domestic activity with Covid-19 largely contained across the sub-region.

The GDP growth forecast for the sub-region in 2021 was lowered to 8.6 per cent from 8.8 per cent in the update while it is expected to maintain 7 per cent in 2022.

The report said Covid-19 has receded in developing Asia, but rising infections worldwide and the recent emergence of a fast-spreading variant suggest that the pandemic will take more time to play out.

Ever since the Asian Development Outlook 2021 was updated in September, coronavirus infections in the region have declined steadily.

As of November 30, the daily average number of new cases in developing Asia had fallen to about 50,000, down 71 per cent from August and 88 per cent from the highest peak in May.

However, the number of cases globally is on the rise again, driven by a renewed wave of infections in Europe.

The recent emergence of the highly mutated Omicron variant is a sobering reminder that further outbreaks remain a possibility, the ADB said.

As it appears to be significantly more transmissible than earlier variants, the economic impact could be substantial and developing Asia could be affected through various channels, it added.