Bangladesh’s GDP to grow at 5.6%, says World Bank

The country is still facing inflationary pressure, the organisation said

Staff Correspondentbdnews24.com
Published : 2 April 2024, 10:04 AM
Updated : 2 April 2024, 10:04 AM

The World Bank says that, despite its strong turnaround in the post-COVID-19 economic recovery process, the economy is facing disruptions due to inflationary pressure and other factors.

As a result, the growth rate of Bangladesh Gross Domestic Product (GDP) may be 5.6 percent in the current fiscal year, the organisation said at a press conference on Tuesday.

The WB released the Bangladesh Development Update at its offices in Dhaka’s Agargaon, noting that the high inflation rate, persistent foreign trade deficit, weakness in the financial sector and global economic uncertainty are disrupting the continuation of the economic recovery process.

The persistent inflation has eroded purchasing power, while tight liquidity conditions, rising interest rates, import restrictions, and increasing input costs from rising energy prices are dampening investment.

The organisation noted that the monetary police is working more effectively than before after the interest rate was lifted from 9 percent. By the end of the 2024-25 fiscal year, the growth rate may increase slightly to 5.7 percent.

Urgent monetary reform and a single exchange rate regime will be critical to improve foreign exchange reserves and ease inflation, the WB said. It also urged for greater exchange rate flexibility and structural reforms to diversify the economy and raise resilience.

Abdoulaye Seck, the World Bank’s country director for Bangladesh and Bhutan, said, “Bangladesh’s strong macro-economic fundamentals have helped the country overcome many past challenges.”

“Faster and bolder fiscal, financial sector, and monetary reforms can help Bangladesh to maintain macroeconomic stability and reaccelerate growth.”

However, the international development support organisation also noted that the readymade garment sector is growing and the export diversification initiatives and financial sector reforms will increase sustainability in the medium and long term.

A companion report – the South Asia Development Update – was also released on Tuesday.

The report says that South Asia is expected to remain the fastest-growing region in the world for the next two years, with growth projected to be 6.0 percent in 2024 and 6.1 percent in 2025. This will be driven mainly by ‘robust’ growth in India and Bangladesh and recoveries in Pakistan and Sri Lanka.

However, the strong outlook obscures the fact that growth still lags behind pre-pandemic levels and is reliant on public spending.

“Persistent structural challenges threaten to undermine sustained growth, hindering the region’s ability to create jobs and respond to climate shocks,” the report said.

A sharp slowing of private investment growth has been noted in South Asian countries and not enough jobs are being created to keep pace with the increasing size of the working-age population, it added.

“South Asia’s growth prospects remain bright in the short run, but fragile fiscal positions and increasing climate shocks are dark clouds on the horizon,” said Martin Raiser, World Bank vice president for South Asia. “To make growth more resilient, countries need to adopt policies to boost private investment and strengthen employment growth.”

“South Asia is failing right now to fully capitalise on its demographic dividend. This is a missed opportunity,” said Franziska Ohnsorge, World Bank chief economist for South Asia. “If the region employed as large a share of the working-age population as other emerging markets and developing economies, its output could be 16 percent higher.”