After the World Bank, the Asian Development Bank has now projected a growth figure that is much lower than the government's provisional estimate of 7.65 percent.
The Manila-based multilateral lender yesterday said Bangladesh's economic growth this fiscal year would be 7 percent as consumption demand slackens despite a rebound in remittance inflow.
Earlier this week, the World Bank cast doubts over the provisional estimate, saying Bangladesh's potential GDP growth is 6.5-6.6 percent.
The question is whether the economy is doing well and the answer is yes, said Manmohan Parkash, ADB's country director, while unveiling the Asian Development Outlook 2018, the lender's flagship annual publication, at its Dhaka office at Agargon.
“We can debate over whether it is 7.1, 7.2 or 7.3 percent. But by any standard, 7 percent is a very good GDP rate,” he said.
In fiscal 2016-17, GDP growth was 7.28 percent. Logging in 7 percent growth for three years straight is commendable, he said.
“7 percent growth or higher is actually pointing towards a robust economic performance and that's why we are saying we are broadly optimistic about Bangladesh's economy and it will continue to do well,” he added.
However, economic diversification is essential for sustaining the high growth, said Soon Chan Hong, an economist of the ADB Bangladesh.
Sustained high growth demands an expanded industrial base and a diversified export basket, which, in turn, depend on filling large infrastructure deficits and implementing policy reforms.
Bangladesh has significant infrastructure deficits, ranking near the bottom globally in commercial access to basic infrastructure such as electricity, roads and railways.
Further, the tax system requires broad reform.
The implementation of the new value-added tax law, which was deferred once again last year, needs to be accomplished without delays to generate the additional revenue that is essential for infrastructure investment. Parkash called for dialogues between stakeholders on the VAT issue.
Export performance is expected to strengthen on projected higher growth in the euro zone and the US. However, net exports will not add to growth as imports are expected to expand strongly with substantial restocking of food grains, rising fuel requirements and a steady increase in imports of capital goods, the ADB said.
To foster greater productivity and competitiveness in domestic manufacturing, import tariffs need to be lowered and rationalised.
Broadly favourable global growth and trade prospects are expected to continue into fiscal 2018-19. With a further strengthening of exports and remittances, GDP growth that year is expected to firm to 7.2 percent.
A marked stepping up of budget revenue mobilisation could fuel a somewhat stronger advance in investment and therefore growth.
On the supply side, agriculture growth is expected to moderate to 2.3 percent in fiscal 2017-18 from 3 percent last year because it is from a higher base and prolonged flooding again hindered the planting of the wet monsoon rice crop.
Industry growth is forecasted to pick up slightly to 10.4 percent, underpinned by higher exports. Expansion in services is likely to slow to 6.4 percent from 6.7 percent in the previous year as consumer spending moderates and growth in agriculture income slows.
Inflation is expected to accelerate to an average of 6.1 percent in fiscal 2017-18.
The outlook is subject to downside risks.
The current account deficit may deteriorate further if policies to rein in import demand do not succeed.
“Failure to boost revenues and tap foreign financing could unduly limit spending on needed infrastructure. Political uncertainty ahead of the national election could undermine consumer and investor confidence.”
Fiscal risks from the influx of displaced people from Myanmar appear minimal considering the assistance provided by international relief agencies and others. Finally, unfavourable weather is always a risk, said the ADB.
More attention to strengthening bank performance would expand access to finance for the private sector.
About the situation in the banking sector, Parkash emphasised proper credit risk management before making any lending decision.
He also praised Bangladesh's increased emphasis on project implementation.