ADB raises growth forecast

The Asian Development Bank is bullish over Bangladesh's economic prospects this fiscal year, upgrading its growth forecasts while downgrading those for the rest of Asia Pacific save for Vietnam and Fiji.

The Manila-based multilateral lender tipped Bangladesh's gross domestic product to grow at 6.7 percent in fiscal 2015-16, up from its earlier prediction of 6.4 percent in its flagship annual economic publication, Asian Development Outlook that came out in March.

The optimism comes after the country outperformed ADB's growth forecast of 6.1 percent for fiscal 2014-15 in spite of political turmoil in the first quarter of 2015 that adversely affected transport services, exports and private investment.

Growth held up well because of brisk domestic demand, boosted by higher remittances, private sector wages and public investment, said Kazuhiko Higuchi, country director of ADB, while unveiling the updated version of March's report yesterday at the lender's office in Dhaka.

Mohammed Parvez Imdad, principal country specialist of ADB's Bangladesh office, presented the Bangladesh chapter of the report at the event.

The GDP growth forecast has been revised upwards upon expectations that exports will grow with the continued economic recovery in the US and the Eurozone and remittance will soar further, which, in turn, will boost consumption demand.

ADB also expects the private and public investment to pick up as the business climate improves in a stable political situation and spending to increase under the annual development programme, both of which will have a positive impact on GDP growth.

ADB praised the country's macroeconomic management, which, it said, has helped reduce inflation to 6.4 percent in fiscal 2014-15 from 7.4 percent a year earlier.

“This was a very good achievement,” Higuchi said.

Provided that normal weather prevails and prices remain favourable, agriculture growth is projected to move up to 3.2 percent this fiscal year from 3 percent last year.

Industrial growth is expected to strengthen but modestly to 9.8 percent from 9.6 percent last fiscal year on the back of better performance in readymade exports, manufacturing for domestic market and construction.

Growth in services is expected to increase to 6 percent from 5.8 percent as agriculture and industry expand.

Export growth is expected to increase to 6 percent this year, up from 3.3 percent a year ago.

Imports are projected to increase by 13 percent, from 11.2 percent the previous year, mainly in capital goods, industrial raw materials and food grains.

Remittance inflows are likely to grow 9 percent in fiscal 2015-16 from 7.7 percent a year earlier as the government steps up efforts to place workers overseas. Several risks could derail the projections, and foremost among them is political instability.

Failure to attain the revenue target without matching expenditure adjustments would create inflationary pressure as the government borrowed from the banks and so undermine macroeconomic stability.

Likewise, inadequate foreign investments would limit spending through the development plan on infrastructure, and thereby curtail growth.

Meanwhile, softer growth prospects for China and India, and a slow recovery in the major industrial economies will combine to push growth in Asia for 2015 and 2016 below previous projections, according to the ADB report. ADB now sees GDP growth for the region coming in at 5.8 percent in 2015 and 6 percent in 2016 -- below the March forecasts of 6.3 percent in both years.

China -- the world's second largest economy -- has seen growth moderate due to a slowdown in investment and weak exports in the first eight months of 2015. Growth is now seen at 6.8 percent in 2015, down from 7.2 percent projected earlier, and below the 7.2 percent posted in 2014.

External demand weaknesses and a slower-than-expected pace of enacting key reforms are holding back India's growth acceleration, with the pace in 2015 now seen at 7.4 percent, down from 7.8 percent forecast earlier.

Southeast Asia, meanwhile, is bearing the brunt of the slowdown in China -- one of its key markets -- as well as subdued demand from industrial countries, with growth in 2015 now seen at 4.4 percent, before bouncing back to 4.9 percent in 2016.