IMF halves Bangladesh GDP growth forecast with recovery after September

The International Monetary Fund has halved the GDP growth forecast for Bangladesh in 2019-20 with economic activities hit hard by the coronavirus pandemic in the second half of the fiscal year.

Gradual recovery is projected to begin in the second quarter of FY21, the global lender said in a report dated May 21 but published on Jun 3.

GDP growth is projected at 3.8 percent for FY20, about 3.5 percentage points less than the projection the IMF had forecast before the pandemic had begun, according to the report.

Bangladesh is experiencing the largest one-year decline in the last three decades as the growth is projected to drop by about 4.5 percentage points relative to the previous financial year, the report said.

Domestic activity is projected to decline as policies to limit the spread of COVID-19 are implemented and the national shutdown mandated by the government aims to keep people indoors.

The large share of workers in the informal sector and in daily paid work indicates that a substantial part of the labour force is highly vulnerable to the COVID-19 shock.

Despite signs of disruptions in the domestic food supply chain, overall inflation is projected to remain broadly unchanged, owing partly to a bumper harvest in the agriculture sector, the IMF said.

The COVID-19 pandemic is expected to severely affect the Bangladeshi economy. Remittance inflows have already started to decline in March. Exports also declined sharply in April with cancellation of orders worth several billion US dollars for the main exporting sector - readymade garment.

As a result, an immediate external financing gap of about $2.9 billion has emerged along a fiscal financing gap of about $2.8 billion, the IMF said.

To help Bangladesh tackle the coronavirus crisis, the Executive Board of the IMF on May 29 approved a disbursement of $244 million under the Rapid Credit Facility and a purchase of $488 million under the Rapid Financing Instrument.

This will help finance the health, social protection and macroeconomic stabilisation measures, meet the urgent balance-of-payments and fiscal needs arising from the COVID-19 outbreak, and catalyse additional support from the international community, the global lender said.