World Bank lowers Bangladesh growth projection to 5.6pc
Published : Wednesday, 4 October, 2023 at 12:00 AM Count : 562
The World Bank (WB) has lowered Bangladesh's economic growth projection to 5.6 per cent for the current fiscal 2023-24 due to persistent inflationary pressures and external sector challenges.
The projection in its October update, released on Tuesday in Dhaka made this downward projection at a press briefing up from 6.2 percent GDP growth projected in April for the current fiscal year.
Growth is however expected to accelerate to 5.8 percent in 2024-35 as inflation eases and external sector normalizes gradually, it said.
The global lender further said there is uncertainty gathering ahead of the national elections, slated for early January 2024.
World Bank Country Director for Bangladesh and Bhutan Abdoulaye Seck, WB Senior Economist Bernard James Haven, WB Economist Nazmus Sadat Khan, Senior Communications Officer Mehrin Ahmed Mahbub are attended at the press briefing.
World Bank Chief Economist for South Asia Franziska Ohnsorge are also attended through online.
"Bangladesh's progress in reducing poverty is multi-dimensional-it has improved poor people's wellbeing, including in reduced infant mortality and stunting, and improved access to electricity, sanitary toilets, and education.
The rural areas witnessed faster poverty reduction than the cities and towns," said Abdoulaye Seck, World Bank Country Director for Bangladesh and Bhutan.
"Despite these gains, inequality has slightly narrowed in rural areas and widened in urban areas. The World Bank stands ready to support Bangladesh to take on urgent reforms to accelerate inclusive economic growth," he said.
The World Bank report said, inflation may persist if domestic energy prices are not adjusted in line with global slowdown in energy prices or if the global inflationary pressure rises.
Stabilisation of the external sector depends on removing distortions in exchange rates and lifting exchange rate ceilings.
Bangladesh made a strong recovery from the COVID-19 pandemic, but the post-pandemic recovery was disrupted in FY23 with rising inflation, financial sector vulnerabilities, external pressure, and global economic uncertainty, the report said.
Bangladesh's Current Account Deficit (CAD) narrowed in FY23 to $3.3 billion from $18.6 billion in FY22, supported by resilient export growth and import suppression measures.
However, the financial account moved into deficit, as trade credit and medium- and long-term borrowing contracted sharply. As a result, the Balance of Payments (BoP) deficit widened to $8.2 billion in FY23, up from $6.7 billion in FY22, the World Bank update said.
It has suggested some structural reforms to accelerate the economic recovery including market-driven treasury rate and interest rate to serve as a market proxy, removing interest rate caps to further improve monetary policy transmission and exchange rate flexibility to remove forex distortions and attract remittance inflows through formal channels.
It has also suggested reducing tariffs on essential imports to curb inflationary pressure, in line with the new National Tariff Policy.
Saying monetisation of the deficit can contribute to inflationary pressure, the report suggested strengthening revenue mobilisation as a priority - particularly VAT and Income Tax.
Increased stressed assets and undercapitalised banks necessitate immediate measures to strengthen bank management, and crisis preparedness measures, it added.
Bangladesh's expected graduation from the UN's Least Developed Country (LDC) status in 2026 will present new challenges, the report said suggesting Bangladesh needs to strengthen its trade competitiveness, expand bilateral and multilateral free trade agreements, strengthen financial sector stability and soundness.
Improving business climate to attract investment, domestic resource mobilisation, addressing climate change adaptation and mitigation, and improving the governance framework are other areas of priority action, the WB said.