The International Monetary Fund has reviewed its outlook for the economic growth of Bangladesh to 5 per cent for 2021, up from 4.4 per cent it forecast in October.
The lending body also forecasted that the worldwide output would rise 6 per cent this year, a rate unseen since the 1970s. It emphasized on the global unprecedented policy responses to the COVID-19 pandemic.
The multilateral lender made the predictions in its World Economic Outlook, which was published on 6th April (Tuesday).
According to the IMF, the country will return to its high growth trajectory next year, when the gross domestic product (GDP) is projected to expand by 7.5 per cent. It is predicted that the GDP will increase by 7.2 per cent in 2026. Although the IMF did not provide any explanations over its projection.
However, experts of Bangladesh said higher GDP growth is still uncertain since the country is currently experiencing a fresh surge of coronavirus infections, which have forced the government to impose lockdown.
Zahid Hussain, a former lead economist of the World Bank’s Dhaka office, said the IMF had upgraded its global projections mainly due to the progress in vaccination programmes across the world.
“But they could not anticipate the latest surge in coronavirus infections because all the figures are finalised a month before the report is published,” he said.
The IMF’s projection had been very plausible if there were no pickup in coronavirus caseloads and disruptions as external demand was expected to pick up in the second half of 2021, the economist said.
“The problem is Bangladesh is now in lockdown, and there is a surge in infections. So, uncertainty has deepened,” he added.
In Bangladesh, domestic demand, especially private consumption expenditure is the bigger component of the economy compared to the external demand.
“We were experiencing a recovery in the private consumption expenditure as people started purchasing. This will now face a setback again,” Hussain further added.
As per the report, the country’s point-to-point inflation will stand at 5.8 per cent in 2021 and will slightly decline to 5.6 per cent in 2022.
Current account balance is likely to stand at 0.4 per cent in 2021, improving from negative 1.5 per cent in 2020.
Meanwhile, on 31st March, the World Bank projected Bangladesh’s GDP to grow as high as 5.6 per cent in the fiscal year 2020-21, subject to three factors.
The WB said in its “South Asia Economic Focus Spring 2021 South Asia Vaccinates” report, stated that the projected expansion will depend on how the ongoing vaccination campaign proceeds, whether new restrictions to mobility are required, and how quickly the world economy recovers.
Bangladesh’s GDP growth is expected to rise to 5.1 per cent in FY2022 and to 6.2 per cent in FY2023, it added.
A gradual recovery is expected to continue in Bangladesh, particularly if the government’s Covid-19 recovery programmes are implemented swiftly.
According to the IMF’s projection, India’s GDP would grow by 12.5 per cent in 2021, Sri Lanka by 4 per cent, Nepal by 2.9 per cent, and Pakistan by 1.5 per cent.
Even with high uncertainty about the path of the pandemic, a way out of this health and economic crisis was increasingly visible, the lender said.
The lender has projected a stronger recovery in 2021 and 2022 for the global economy compared to its previous forecast, with growth projected to be 6 per cent in 2021 and 4.4 per cent in 2022.
Nonetheless, the IMF emphasized the high degree of uncertainty surrounding the outlook, and that improvements could easily be tripped up by any of several factors, with success against the pandemic topping the list.
“Greater progress with vaccinations can uplift the forecast, while new virus variants that evade vaccines can lead to a sharp downgrade,” it said.
Another big risk centers around the persistence of accommodative policies, from the United States in particular. Long-term interest rates around the world have risen sharply since January, as market participants revise their expectations for how soon the US Federal Reserve begins to normalize its policy stance.