WB lowers GDP growth forecast for Bangladesh
"Export growth is expected to slow as economic conditions in the key export markets deteriorate, while rolling blackouts, gas rationing, and rising input costs weigh on manufacturing output."
The World Bank has slashed its economic growth projection for Bangladesh for the current fiscal year to 6.1 percent because of higher inflation, energy shortage, slowdown of the recovery from the pandemic, and the war in Ukraine.
The new forecast is 0.6 percentage points lower than its previous projection of 6.7 percent made in June, according to the WB's South Asia Economic Focus titled "Coping with Shocks: Migration and the Road to Resilience" yesterday.
The projected growth is the lowest since 2019-20 when it fell to 3.45 percent as the pandemic brought the economies around the world to their knees.
Last month, the Asian Development Bank also cut its projection for Bangladesh's gross domestic product (GDP) growth to 6.6 percent this fiscal year from 7.1 percent.
The government had set an ambitious economic growth target of 7.5 percent for the current fiscal year.
According to the World Bank report, GDP growth is projected to decelerate slightly in 2022-23 due to the slowdown of post-Covid recovery in consumption and investment.
"Higher inflation is expected to dampen private consumption growth, following substantial energy price increases.
"Export growth is expected to slow as economic conditions in the key export markets deteriorate, while rolling blackouts, gas rationing, and rising input costs weigh on manufacturing output."
The WB also cut its growth forecast for India, Pakistan, Sri Lanka and the Maldives.
It revised down the growth projection for India by 0.1 percentage points to 7 percent, for Pakistan by 2 percentage points to 2 percent, for Sri Lanka by 0.5 percentage points to a negative 4.2 percent, and for the Maldives by 2 percentage points to 8.2 percent.
It raised the economic growth outlook for Nepal by 1 percentage point to 5.1 percent.
At a virtual press briefing yesterday, WB Chief Economist for South Asia Hans Timmer said Bangladesh is one of the countries that was hit hard by the most recent developments, especially the increase in commodity prices and the slowdown in high-income countries, particularly in Europe.
Since Bangladesh exports a lot of readymade garments to Europe, high commodity prices have led to a sharp increase in the cost of the garment industry.
That is a big hit for Bangladesh because it relies so much on RMG industry, Timmer said, adding that it led to the weakening of the currency and a decline in the foreign exchange reserves.
Garment shipment accounts for about 85 percent of Bangladesh's exports.
Amid dollar shortages, Bangladesh's national currency has lost its value by more than 20 percent since the outbreak of the war and the reserves fell to $36.44 billion on September 28, down 21.25 percent from a year ago, Bangladesh Bank data showed.
According to the WB report, the balance of payments pressure has in turn resulted in dwindling foreign exchange reserves. This led Sri Lanka, Pakistan, and Bangladesh to request the International Monetary Fund for support.
But unlike the two other countries, Bangladesh's reserves have not fallen to dangerously low levels, the country is not facing political instability, and inflation is still below 10 percent although it is above recent historical levels, it stated.
WB Vice President for South Asia Martin Raiser said, "Pandemics, sudden swings in global liquidity and commodity prices, and extreme weather disasters were once tail-end risks. But all three have arrived in rapid succession over the past two years and are testing South Asia's economies.
"In the face of these shocks, countries need to build stronger fiscal and monetary buffers, and reorient scarce resources towards strengthening resilience to protect their people."
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