Bangladesh GDP growth to be 5.5 to 6pc in today's fiscal: ADB

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Asian Development Bank (ADB) on Wednesday explained that Bangladesh’s GDP growth rate may fluctuate between 5.5 to 6 % in today's fiscal, which is quite enviable in today's circumstances, reports UNB.

The organisation also said the resurgence in Covid-19 cases and delays in availability in the way to obtain vaccines, both globally and domestically, could undermine the monetary growth outlook. Under sustained global recovery and effective Covid -19 management Bangladesh’s GDP growth is likely to further strengthen up to 7.2 % in the 2022 fiscal.

Presenting the most recent Asian Development Bank (ADB) report Asian Development Outlook (ADO) 2021, ADB senior economist Soon Chan Hong said ADB provides financing of $940 million to Bangladesh to procure Covid-19 vaccine which is under process.

“ADB has recently provided $500 million to invest in immediate expenditures and programmes for expansion of social safety nets and support to industries to protect jobs (with co-financing of $651 million). Besides, for monetary restoration and job preservation or creation, we will provide $50 million loan to help restore monetary activities of the microenterprises and $150 million loan to support self-employment and employment generation for unemployed youth, micro entrepreneurs and returnee migrants (under process),” Soon Chan Hong added.

Hong mentioned that ADB will support $500 million to expand social protection and promote financial inclusion and additional $500 million to strengthen public financial management and enhance access to finance (under process).

“For supporting private sector, ADB will provide $10 million loan for emergency working capital support to Pran Diary Limited and $782 million and guarantees through Trade Finance Programme and offer Chain Finance Programme. Besides, a mixture of guarantee and risk participation supporting $200 million of local currency loans, benefiting 774,000 individual borrowers through Microfinance Risk Participation and Guarantee Programme,” he added.

ADB’s country director Manmohan Parkash said the pandemic has been going on for over a year now & most countries in the world have already been affected.

“At the ADB, we've devoted our efforts in helping our developing member countries combat the impacts of Covid-19 pandemic. We are actually seeing resurgence in the virulence of the pandemic with high morbidity and mortality, requiring our continued attention,” he added.

In comparison to many developed countries in North America and Europe, and various developing countries in Asia and the Pacific, the acuteness of the pandemic was less severe in Bangladesh through the first wave in 2020.

“Bangladesh coped up reasonably well against the pandemic and the economy showed early signs of recovery. Through FY 2020 GDP growth plummeted to around 5.2 % from 8.2 % in the previous year, it found in subsequent months supported by stimulus package implementation and recovery in global growth and world trade,” according to his statement.

Record remittance inflow keeps domestic demand buoyant
Record remittance inflow kept domestic demand buoyant and underpinned solid growth in private consumption. Unemployment, which had increased to 22.4 per cent in April-July 2020, dropped sharply to 3.8 % in September with stimulus package implementation and broad resumption of financial activity.

On the supply side, growth in the agriculture, industry and service sector picked up. Medium-sized and large manufacturers reversed production volume contraction by 16.4 per cent in Q4 FY 2020 with 6.8 % growth in Q1 FY 2021. Likewise, bank credit to trade and commerce increased by 15.5 % and consumer finance by 11.9 per cent in the same period.

Cargo handled at the Chattogram port revived to the level recorded a year earlier. The commencement of the vaccination drive in February, 2021, alongside the improved global financial conditions and trade, and employment, helped the economic recovery.

“However, we are now experiencing the second wave of the pandemic with an elevated number of infections and deaths. The healthcare system has been stretched again to its limits. The federal government has imposed lockdown and travel restrictions to control the spread of infection. These necessary measures helps you to save lives but could adversely affect livelihoods and slow down monetary recovery,” he added.

The situation is still fluid
The potential slowdown in vaccination because of supply-related issues may further exacerbate the already adverse situation. Moreover, the impact of the second wave in export-destination countries may possibly also undermine economic recovery. Considering that the next wave of Covid-19 is ongoing, and the problem is still fluid, these impacts were not considered in our outlook.

Revenue collection can also be higher than last year. Inflation is likely to be manageable in the number of 5.5 to 6 per cent. Broad money growth will probably reach the gross annual target of 15 %. Overall growth in imports is likely to be modest, and the trade deficit is forecast to narrow marginally as recovery in exports outpaces imports.

The current account balance is expected to cross into a tiny surplus. Growth in revenue, however, is expected to be modest. Public expenditure is geared to grow more than the growth in revenue resulting in a slightly higher deficit - about 6 per cent.

Manmohan Parkash said achieving the targets of development and other spending could possibly be challenging as earnings collection in the first eight months of FY 2021 grew by only 5.2 % compared to 9.1 % growth in the same period a year earlier.

“Concerted efforts are necessary for achieving the gross annual development program spending and boosting revenue. The outlook is subject to downside risks. However, ADB is fully focused on supporting Bangladesh,” he also said.

Parkash also added that Bangladesh's economy has withstood the impacts of the first wave of the pandemic with timely and effective stimulus measures, ensuring basic services and commodities for the indegent and vulnerable. The economy is currently going through the second wave of the pandemic, and the near future growth will rely upon how effectively it really is managed.

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