Bangladesh is expected to remain among the fastest-growing world economies in 2021, said the International Institute of Finance (IIF) in its outlook.
The Washington-based IIF came up with this update on its website outlook for frontier Asian economies, assessing their key risks recently.
As per the outlook, Bangladesh and Vietnam are among the few countries that were able to maintain growth in 2020.
The IIF expected that both the countries will remain among the fastest growing economics in the world in 2021, saying the robust domestic demand and competitive manufacturing sectors, coupled with rebounding exports, will be the main growth drivers this year.
It, however, said economic slowdown has kept inflation in check, allowing for expansionary monetary policies with central banks cutting interest rates and taking additional measures to inject liquidity.
Asian frontier markets have provided significant fiscal support to cushion the Covid-19 blow, the IIF cited.
Bangladesh has also supplied more than Taka 1.0-trillion stimulus to boost the domestic economy, it mentioned.
With already narrow fiscal buffers, the IIF sees significant external financing needs and growing pressure on debt sustainability.
"In Bangladesh and Vietnam, the risk of debt distress is low. There, we expect debt as a share of GDP is expected at 40 per cent and 57 per cent respectively, by the end of the year," it added. It said both Bangladesh and Vietnam have been more resilient than many emerging markets (EMs) and non-Asian frontier markets (FMs) to Covid-19 shocks.
It said external positions remain manageable in Bangladesh and Vietnam, with the latter's position strongest for current account surplus, an appreciating exchange rate and significant reserve accumulation.
The IIF said Bangladesh's current account deficit is relatively small. Remittance was surprisingly strong in 2020 as lockdown and social distancing measures might have helped migrant workers to remit money back home, it added.
But, IIF said, a significant resurgence of the pandemic in recent months might affect income prospects.
Frontier Asian countries experienced smaller economic contractions compared to other EM and FM regions, likely due to favourable demographics and structural reforms implemented in the past.
Nevertheless, risks remain from the resurgence of Covid-19 globally as well as the country-specific factors, the IIF observed.