Bangladesh's economy will grow fastest in South Asia: World Bank

The World Bank has forecast a 7.2 percent growth in the gross domestic product (GDP) of Bangladesh in the fiscal year 2019-20, which is 1 percentage point lower than the government target but substantially higher than the average growth of South Asian countries and projected global growth.

The World Bank estimated global growth of 2.4 percent for 2019 and 2.5 percent for 2020, lower than global economic growth of 3 percent in 2018.

The global development agency published its flagship report "Global Economic Prospects: Slow Growth, Policy Change" on Wednesday.

The report blamed slower-than-expected recovery in trade and investment despite cooler trade tensions between the United States and China.

According to the report, Bangladesh's economy grew 8.1 percent in the fiscal year 2018-19, and the growth may drop to 7.2 percent in the current fiscal year but may slightly rise to 7.3 percent in the next two fiscal years.

The report has forecast 5.5 percent growth on average for South Asian countries while Bangladesh will witness the highest growth in this region and Pakistan will be the country with the lowest growth – 2.4 percent – in 2020.

India will grow 5 percent in this fiscal year and the country will recover in 2020-21 with the growth of 5.8 percent and 6.8 percent in 2021-22.

The country grew by 8.2 percent in the fiscal year 2016-17 and the rate fell to 7.2 percent in 2017-18 and 6.8 percent in 2018-19.

"In India, where weakness in credit from non-bank financial companies is expected to linger, growth is projected to slow down," said the report.

Among other countries in this region, Nepal's economy will grow 6.4 percent, lower than the growth of 7.1 percent in the previous fiscal year.

Bhutan's economy will recover with 5.6 percent gross domestic product (GDP) growth this year, which was 3.9 percent in the last fiscal year.

The country will grow 7.6 percent in the next fiscal year and 6.2 percent in 2021-22.

Bangladesh, the third-largest economy in South Asia, fared better than India and Pakistan, with growth officially estimated at 8.1 percent in the fiscal year 2018-19, said the report.

However, Bangladesh's exports showed signs of softening in recent months, after a substantial increase in exports to major trade partners in the last fiscal year.

"Growth in many commodity importer countries like Bangladesh remains solid due to robust private consumption and supportive policies in a context of subdued inflation and resilient capital flows." said the report.

The World Bank report identified inefficiencies in revenue collection, lack of infrastructure and lower factor productivity as major obstacles to the economic development of Bangladesh.

The report said, lack of progress in reforms to improve tax collection could result in more acute revenue shortfalls and put more pressure on elevated fiscal deficits.

Many firms cited infrastructure gaps as important obstacles to their business activities. Firms that cited infrastructure obstacles were found to be less productive in Bangladesh, said the report.

The World Bank's lead economic forecaster Ayhan Kose said, "This modest increase in global growth marks the end of the slowdown that started in 2018 and took a heavy toll on global activity, trade and investment, especially last year."

Ayhan also said, "We do expect an improvement, but overall, we also see a weaker growth outlook."

While the tariff rate reduction will have a "rather small" effect on trade, the deal is expected to boost business confidence and investment prospects, contributing to a pickup in trade growth, added Ayhan.

Global trade growth is expected to improve modestly in 2020 to 1.9 percent from 1.4 percent in 2019, which was the lowest since the 2008-2009 financial crisis. This remains well below the 5 percent average annual trade growth rate since 2010, according to the report.

But both trade and overall economic growth prospects remain vulnerable to flare-ups in US-China trade tensions and rising geopolitical tensions. 

Bangladeshi economists expect to surpass World Bank forecast

The government aimed to achieve 8.2 percent GDP growth in the current fiscal year and officials are confident about reaching the target.

Dr Shamsul Alam, member of the General Economic Division (GED) of the planning commission told The Business Standard that the government set the target based on the performance of several indicators in the last decade.

"The foreign agencies are forecasting based on limited information about several indicators but the government has complete data about the production, consumption, export, investment and other indicators. So, the forecast of the development partners bears little relation to reality," he said, adding that the government will achieve its targeted growth in the current fiscal year.

Meanwhile, the government achieved 8.15 percent growth in the last fiscal year following a target of 7.8 percent growth.

However, Dr Zahid Hossain, former lead economist of the World Bank told The Business Standard that 7.2 percent growth is very high.

The health of many indicators like export, import, credit, and revenue has not been well recently. That is why it may become difficult to achieve 7.2 percent growth in this fiscal year.

The government set the target at the beginning of the fiscal year when there was no information about these indicators.

"Export is about 6 percent negative, import of raw materials and capital machinery are facing a negative growth. Credit growth is also negative. Then how will such high growth be achieved?" he asked.

The agriculture sector can grow at 4 percent at best, he said, adding high growth in service and manufacturing sectors is essential to achieve 7 or 8 percent growth.