ADB holds steady on Bangladesh forecast, trims developing Asia predictions

The government's accommodative policy on credit is expected to promote private investment.  And rising remittance will stimulate domestic demand, keeping the country's growth momentum up.

The Asian Development Bank (ADB) presented the positive outlook for Bangladesh in its latest report released on Wednesday, keeping its growth projection unchanged at 8.1 percent for this year, when other developing Asian economies are under a dark shadow.

In a supplement to its Asian Development Outlook 2019, the Manila-based bank revised its initial growth forecast for developing Asia.

The report said it now expects GDP in developing Asia to expand 5.2 percent in both 2019 and 2020, down from the September forecast of 5.4 percent growth this year and 5.5 percent next year.

Export growth, which has remained low, is projected to pick up, thanks to the government's fiscal support of export-oriented business, according to the report.

The ADB in its latest report revised down the growth projection of most Asian countries, including both giants India and China.

The ADB revised down its growth projection for India this year from the previous 6.5 percent to 5.1 percent, and for China from 6.2 percent to 6.1 percent.

Bangladesh achieved 8.15 percent GDP growth in the 2018-19 fiscal year, slightly higher than the preliminary estimation of 8.13 percent, according to the Bangladesh Bureau of Statistics.

The government has set a target of 8.2 percent growth for the current fiscal year.

Although, the country kept its ambitious growth momentum, private sector credit growth remained depressed amid a lack of demand.

Slowdown in export-import businesses is attributed to slow credit growth. Moreover, banks are cautious in lending amid rising nonperforming loans, resulting in excess liquidity in the banking sector.

In this situation, the government has been pressurising banks to bring down their lending rates to a single digit to facilitate industrialisation.

The government recently formed a committee to find a way to implement the single-digit interest rate.

The finance ministry has announced that it will go for the implementation of the single-digit interest rate from January next year.

Although most financial indicators including export, import, private sector credit, remained down, only remittance retained a strong growth, supported by the government's cash incentive.

Remittance inflow increased by 32 percent year-on-year in November.

Data from the central bank shows that export growth was negative 6.65 percent during the first four months of the current fiscal year, while the import growth was negative 3.17 percent.

The ADB in its report gave a positive reaction over inflation, saying that it remained stable in the first 3 months of the 2019-2020 fiscal year with 5.5 percent in September.

However, the recent onion crisis broke the stability in inflation, taking it to 6.05 percent in November, the highest level in the last 26 months, according to the BBS report.

"While growth rates are still solid in developing Asia, persistent trade tensions have taken a toll on the region and are still the biggest risk to the longer-term economic outlook," ADB Chief Economist Yasuyuki Sawada said.

"Inflation, on the other hand, is ticking up on the back of higher food prices, as African swine fever has raised pork prices significantly," Sawada added.

The supplement forecasts developing Asia's inflation of 2.8 percent in 2019, and 3.1 percent in 2020, up from the September prediction that prices would rise 2.7 percent this year and next.

Developing Asia faces rising food costs, with 2019 and 2020 inflation seen at 2.8 percent in 2019 and 3.1 percent in 2020, up from the lender's previous estimate of 2.7 percent for both the years.

The report also touched on areas outside developing Asia, including the United States where the forecast remains at 2.3 percent for 2019 and 1.9 percent for 2020. It grew 2.9 percent in 2018.

The ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty.

In 2018, it made commitments of new loans and grants amounting to $21.6 billion. Established in 1966, the ADB is owned by 68 members — 49 from the region.