Bangladesh economy recovered from COVID, but faces new headwinds: WB

In Bangladesh, a rebound of manufacturing and service sector activities led strong growth in FY21 and in the first half of FY22. In the medium term, GDP growth is expected to remain strong. Headline inflation rose to 6.2 per cent in February 2022, driven by a rise in both food and non-food prices. The war in Ukraine and associated sanctions may lead to a higher current account deficit and rising inflation as global commodity prices surge. Public debt remains sustainable, and the March 2022 joint World Bank-IMF Debt Sustainability Analysis assessed that Bangladesh remained at low risk of external and public debt distress.

“Following a strong economic recovery from the pandemic, estimated poverty declined to 11.9 per cent in FY21 from 12.5 per cent in FY20, as per the international poverty rate,” said Mercy Tembon, country director for Bangladesh and Bhutan. “Going forward, close monitoring of inflation and the potential impacts of the war in Ukraine will be important for the country's sustainable and inclusive growth. The World Bank stands ready to help Bangladesh address structural reforms to support recovery and strengthen resilience to future shocks.”

The Update is a companion piece to the latest South Asia Economic Focus - Reshaping Norms: A New Way Forward which notes growth in South Asia, already uneven and fragile, will be slower than previously projected, mostly due to the impacts of the war in Ukraine.ac

The report projects the region to grow by 6.6 per cent in 2022 and by 6.3 per cent in 2023. The 2022 forecast has been revised downward by 1 percentage point compared to the January projection. Countries in South Asia are already grappling with rising commodity prices, supply bottlenecks and vulnerabilities in financial sectors. The war in Ukraine will amplify these challenges, further contributing to inflation, and deteriorating current account balances.

Fibre2Fashion News Desk (KD)