IMF lowers GDP growth forecast to 6% for Bangladesh

The International Monetary Fund (IMF) has lowered its projection of gross domestic product growth for Bangladesh to 6% in the current fiscal 2022-23 from 6.7% as projected in April.

In its latest outlook released on Tuesday ahead of its annual meetings, the global lender has painted a bleak prospect of global growth, forewarning that worse is yet to come and the next year will feel like a recession with shrinking incomes and rising prices.

The growth projection for Bangladesh, made in the October version of the IMF's World Economic Outlook 2022, is substantially lower than the 6.6% growth projected by the Asian Development Bank in September and 0.01 percentage point lower than the World Bank projection.

The IMF outlook, "Countering the Cost-of-Living Crisis", projected 9.1% inflation in Bangladesh in the current fiscal year, substantially higher than the April projection of 5.9%.

The inflation would come down to 6.8% in the next fiscal year, it forecasts.

The IMF projected 2.7% growth in world output for 2023, 0.9 percentage points lower than its April projection.

The report projected average growth for advanced economies at 1.1% in 2023, down from April projection of 2.4%.

Euro areas are projected to grow by 0.5%, far less than 2.3% previously forecast. Germany, Italy and some other developed countries would face negative growth while France, the United Kingdom and some other developed countries would grow by less than 1%, it says.

The report reveals that the global economy continues to face steep challenges, shaped by the Russian invasion of Ukraine, a cost-of-living crisis caused by persistent and broadening inflation pressures, and the slowdown in China.

The three largest economies, the United States, China, and the euro area, will continue to stall, it adds.

"In short, the worst is yet to come and, for many people, 2023 will feel like a recession," it reads, warning that about one-third of the world economy will likely contract this year or next amid shrinking real incomes and rising prices.

Almost everywhere, rapidly rising prices, especially of food and energy, are causing serious hardship for households, particularly for the poor, the IMF outlook says.

Despite the economic slowdown, inflation pressures are proving broader and more persistent than anticipated. Global inflation is now expected to peak at 9.5 percent this year before decelerating to 4.1 percent by 2024, it says, finding policy trade-offs to address the cost-of-living crisis becoming more challenging.

Increasing price pressures remain the most immediate threat to current and future prosperity by squeezing real incomes and undermining macroeconomic stability, it says, cautioning about the risks from both under- and over-tightening of policies.

While under-tightening would further entrench inflation and erode the credibility of central banks, over-tightening risks pushing the global economy into an unnecessarily severe recession, the IMF warns in its outlook.