Staff Reporter :
The Asian Development Bank (ADB) forecasts a strong gross domestic product (GDP) growth for Bangladesh in 2019 with continued recovery in remittance, exports, robust domestic demand and high public spending.
In an update of its flagship publication, Asian Development Outlook (ADO) 2019, ADB projects economic growth for Bangladesh around 8.0 per cent for FY 2019 and FY 2020.
The ADO was released through a media briefing at the Dhaka office on Wednesday. Bangladesh economy grew 7.9 per cent in the last fiscal year (2017-18) from 7.3 per cent in the previous year.
“Continued political calm, improved power supply, and higher growth in private sector credit facilitated the fastest economic expansion in Bangladesh since 1974,” said the ADO.
“Bangladesh’s economy continues to expand with a robust pace, propelled by strong remittance and export growth, robust domestic demand, and expansionary fiscal policy,” said ADB Country Director for Bangladesh Manmohan Parkash while releasing the ADO.
He said the growth is expected to edge up to 8.0 per cent in FY2019 on robust private consumption aided by continued recovery in remittances, higher government spending in large projects and further expansion in private investment and industry are expected to support the growth.
Exports increased by 13.4 per cent in the first seven months of FY2019, doubling 6.6 per cent growth. Growth in readymade garment exports accelerated from 7.6 per cent to 14.5 per cent, benefiting from strong new orders from retailers that are partly attributable to global trade tension elsewhere.
Despite a weaker growth outlook in key exports markets, earnings from apparel exports are expected higher as new destinations strengthen. Tariff tensions between China and the US make Bangladesh an attractive alternative source of manufactures.
Given high demand for low-end products and acknowledged improvement in factory safety standards, ADB projects 14.0 per cent export growth in FY2019 and a further 15.0 per cent in FY2020.
In the first six months of FY2019, import growth slowed steeply from the year-earlier rate of 25.2 per cent to 5.7 per cent. Although imports of intermediate and capital goods increased strongly in this period, imports of food grains and consumer goods markedly declined in the wake of high inventory building and food grain restocking in FY2018.
Considering this, ADB forecasts 10.0 per cent import growth in FY2019 and 12.0 per cent in FY2020.
Remittance growth moderated from 16.6 per cent in the first eight months of FY2018 to 10.0 per cent in the same period this year after the large improvement in FY2018 set a high based on government efforts to reduce the cost of transferring remittances and to sideline unauthorized intermediaries.
Given the situation, ADB forecasts an 11.0 per cent growth in remittance in FY2019 and 10.0 per cent in FY2020. With growth in exports and remittances expected to outpace growth in import demand, the current account deficit is expected to narrow to the equivalent of 2.3 per cent of GDP in FY2019 and 2.5 per cent in FY2020.
Despite strong growth outlook, the ADO sees a number of downslide risks, including failure to boost revenue and improve governance, rising global oil price and banking sector crisis, on the Bangladesh economy.
The ADO suggests for a concerted efforts to boost revenue earnings to support the implementation of development projects.
It also highlights policy challenge in promoting an efficient banking sector, which plagued by high loan performing loans and weak governance.
“The authorities should improve governance in banks, appoint competent professionals as directors in public banks and ensure strict enforcement of existing to bring discipline in the banking sector,” says ADO.
The ADO also forecasts average inflation to 5.5 per cent in FY 19 ease from 5.8 per cent last year, contained by a good harvest and lower food and oil prices.
Year-on-year inflation declined to 5.5 per cent in February 2019 from 5.7 per cent a year before. Inflation is projected to edge up to 5.8 per cent in FY2020 on account of likely further upward adjustments
