World Bank projects resilient economic growth for Bangladesh amid global downturn

Bangladesh's economic growth would jump from 5% (FY21) to 6.4% in the fiscal 2021-22, reaching as high as 6.9% in FY23, although the global growth is expected to decelerate, the World Bank forecasts.

The forecast in the World Bank's latest flagship Global Economic Prospects report for January 2022 was released on Tuesday.

"In Bangladesh, strong export growth, supported by returning readymade garment demand from abroad, and a rebound in domestic demand – with improving labor income and remittance inflows – supported the recovery. Both Bangladesh and Pakistan saw their goods trade deficit widen to record levels on strong domestic demand and rising energy prices," the report said regarding Bangladesh's economic prospect.

The World Bank's forecast for Bangladesh's economic growth is slightly lower than that of the International Monetary Fund's (IMF) latest outlook – 6.6% for the current fiscal year and 7.1% for FY23.

The World Bank report said the global economy is entering a pronounced slowdown amid fresh threats from Covid-19 variants and a rise in inflation, debt, and income inequality that could endanger the recovery in emerging and developing economies.

"Global growth is expected to decelerate markedly from 5.5% in 2021 to 4.1% in 2022 and 3.2% in 2023 as pent-up demand dissipates and as fiscal and monetary support is unwound across the world," the report predicted.

The report further explained that the rapid spread of the Omicron variant indicates that the pandemic will likely continue to disrupt economic activity in the near term. In addition, a notable deceleration in major economies – including the United States and China – will weigh on external demand in emerging and developing economies. 

At a time when governments in many developing economies lack the policy space to support activity if needed, new Covid-19 outbreaks, persistent supply-chain bottlenecks and inflationary pressures, and elevated financial vulnerabilities in large swaths of the world could increase the risk of a hard landing, it added.

"The world economy is simultaneously facing Covid-19, inflation, and policy uncertainty, with government spending and monetary policies in uncharted territory. Rising inequality and security challenges are particularly harmful for developing countries," said World Bank Group President David Malpass.

On the other hand, the Bangladesh government set a target to achieve 7.2% economic growth for the current fiscal year and 7.5% for FY23.

In October last year in its South Asia Economic Focus titled "Shifting Gears: Digitisation and Services-Led Development", WB also predicted a gross domestic product (GDP) growth of 6.4% in the current fiscal year for Bangladesh. Meanwhile, growth for the next fiscal year was estimated at 6.9%.

The slowdown will coincide with a widening divergence in growth rates between advanced economies and emerging and developing economies. Growth in advanced economies is expected to decline but will be sufficient to restore output and investment to their pre-pandemic trend in these economies, the WB report further said. 

In emerging and developing economies, however, growth is expected to drop. By 2023, all advanced economies will have achieved a full output recovery; yet output in emerging and developing economies will remain 4% below its pre-pandemic trend, the report added. 

Referring to recent data, the World Bank report said, "The surge in infections in 2021 related to the Delta variant sapped consumer demand, but to a much more limited degree than previous waves. Persistent supply bottlenecks have weighed on global production and trade. In advanced economies, high vaccination rates and sizable fiscal support have helped cushion some of the adverse economic impacts of the pandemic. In EMDEs, however, the pace of recovery has been further dampened by waning policy support and a tightening of financing conditions."

South Asia economy to expand

In South Asia, the economic output is projected to expand by 7.6% in 2022, accelerating from 7.0% the previous year, largely because of better prospects in Bangladesh, India, and Pakistan.

However, a resurgence of the pandemic, especially with the emergence of Omicron, is a key risk to the outlook, the World Bank said.

India's economy is forecasted to grow by 8.3% in the fiscal year 2021-22 (April to March) and to accelerate 8.7% in FY2022-23, reflecting higher investment from the private sector and in infrastructure, and dividends from ongoing reforms.

In the Maldives, the return of tourists supported 22.3% economic growth in 2021 and the figure will be 11% in 2022, followed by 12% in 2023.

Bhutan is projected to see a 5.1% expansion of its economy in fiscal year 2021-22 (July to June), followed by 4.8% in the next fiscal year.

Nepal and Pakistan are expected to register economic growth of 3.9% and 3.4% in fiscal year 2021-22, respectively, and to grow 4.7% and 4% in the next fiscal year.