WB now doubles GDP growth forecast

The World Bank has more than doubled its gross domestic product (GDP) growth prediction for Bangladesh for the current fiscal year as the economy shows signs of recovery.

The Washington-based lender expects the economy to grow 3.6 per cent in the FY2020-21, up from a projection of 1.6 per cent made in the Global Economic Prospects Update in January.

"The economy is expected to recover gradually, with real GDP growth projected at 3.6 per cent in FY21," the WB said in a document.

The new prediction was made in a paper of the Bangladesh Third Programmatic Jobs Development Policy Credit.

The new GDP growth prediction is still far lower than the government's estimate of 7.4 per cent for the current fiscal year. 

In January, the lender said in Bangladesh growth was estimated to have decelerated to 2 per cent in the last fiscal year.

It is now projecting a growth of 2.4 per cent for FY20, according to the document, which was prepared in February. 

The government's provisional estimate showed the GDP had grown by 5.24 per cent in the last fiscal year.

Private consumption growth will accelerate as pandemic-related disruptions wane in the second half of the fiscal year, supported by remittance inflows, the development lender said. 

"Export performance is expected to recover through FY21 gradually, as improving economic conditions in developed markets support demand for RMG exports."

In the medium term, continued recovery of overall growth will be supported by increased export demand, rising private consumption, and higher public capital expenditure, the document said. 

The fiscal deficit is projected to reach 6 per cent of GDP in FY21 and to moderate in the medium term.

While downside risks are significant, Bangladesh has a record of sustained macroeconomic stability over the past three decades through various global crises, internal political instability and natural calamities, providing additional assurance of its capacity to handle the emerging macroeconomic risks in the near and medium-term, the WB said. 

"Bangladesh's low debt to GDP ratio provides a significant buffer, and despite the increase in spending to deal with the pandemic, the country continues to be at low risk of debt distress."