The World Bank has revised its earlier projection of Bangladesh's economic growth upward for the fiscal 2020-21, thanks to better-than-expected remittance inflows.
The development lender in its latest report says Bangladesh's gross domestic product (GDP) is expected to increase by 3.6% this fiscal year, compared to its earlier forecast of only 1.6%.
But with significant uncertainty surrounding both epidemiological and policy developments, real GDP growth in Bangladesh can range between 2.6% and 5.6% in FY21, according to the report titled "South Asia Economic Focus: South Asia Vaccinates" released on Wednesday.
This growth will depend on how the ongoing vaccination campaign proceeds in the country, whether new mobility restrictions are required, and how quickly the world economy recovers.
On the other hand, growth is projected to stabilise within a 5% to 7% range over the medium term as exports and consumption continue to recover and investment is rising too.
In its eighth Five Year Plan, the Bangladesh government has set a target to achieve a 7.4% GDP growth for this fiscal year.
The World Bank warns that new waves of Covid-19 in Bangladesh might reduce external demand for exports and limit the outflow of migrant workers.
If weakness in revenue collection persists, the fiscal deficit is projected to remain at 6% of GDP in both FY21 and FY22, which was estimated at 5.5% of GDP in FY20.
With growth firming up, extreme poverty – people living on less than $1.9 a day – is projected to decline marginally to 17.9% in FY21, down from 18.9% in FY20.
At $1.9 a day, the poverty rate will further decline to 17.2% in FY22 and reach 16.4% in FY23.
The report highlights that sustaining the economic recovery and further reducing poverty will also depend on implementing the government's Covid-19 response programme, including credit programmes in the banking sector.
Bangladesh's exports of goods and services rebounded in the first half of FY21 as apparel export orders were reinstated and expected to grow 8.4% in FY21 from an estimated 16.8% decline in FY20.
In the meantime, the World Bank mentions that food security improved across the country, with the most significant increase in Chittagong.
South Asia's recovery remains fragile
South Asian economies are bouncing back as the economic growth is set to increase by 7.2% this year after contracting an estimated 5.4% in 2020.
But the recovery remains fragile as the Covid-19 pandemic is not yet fully under control, and vaccinating the whole population is a challenge as healthcare systems' capacity is limited, says the World Bank.
It also says a third wave and the spread of new variants of the coronavirus remain a threat in the region.
South Asia's largest economy India is expected to grow 10.1% in the fiscal 2021-22 (April to March), which is a substantial upward revision of 4.7 percentage points from January 2021 forecasts.
The Maldives's real GDP is projected to grow by 17.1% in the calendar of 2021 after contracting an estimated 28% in 2020 – it experienced the most devastating economic effects of Covid-19 in the region.
In Sri Lanka, the economy is expected to grow by 3.4% in 2021 from the previous year's negative growth of 3.6%.
Pakistan's growth is expected to reach only 1.3% in the fiscal 2020-21 (July-June) and will grow further to 2% in the next fiscal year.
Nepal's GDP is forecasted to grow by 2.7% in the fiscal 2020-21 (mid-July to mid-July).
In Afghanistan, only 1% growth is expected in 2021 (December to December).
The World Bank says Bhutan's GDP will fall further by 1.8% in the fiscal 2020-21 (July-June) before gradually recovering to pre-Covid-19 levels.
Hans Timmer, World Bank's chief economist for the South Asia region, says, "The health and economic benefits from vaccinations greatly exceed the costs involved in purchasing and distributing vaccines for all South Asian countries."
He says, "South Asia has stepped up to vaccinate its people, but its healthcare capacity is limited as the region only spends 2% of its GDP on healthcare, lagging behind any other region.
"The main challenge ahead is to reprioritise limited resources and mobilise more revenue to reach the entire population and achieve full recovery.