World Bank prediction reflects current economic realities
Interestingly, the World Bank has seldom used such wide ranges in its growth projections in the past. It indicates substantial uncertainty within the economy, but also potential for positive growth. A projected growth rate of 5.2% should be regarded as very favourable in the current context
It is unclear what Bangladesh's GDP growth will be by the end of the current fiscal year due to various economic uncertainties. The growth will depend on the remaining eight months of FY25. However, it is possible to make an estimate based on the current situation, which is what the World Bank has done.
Interestingly, the World Bank has seldom used such wide ranges in its growth projections in the past. It indicates substantial uncertainty within the economy, but also potential for positive growth. A projected growth rate of 5.2% should be regarded as very favourable in the current context.
The law and order situation has yet to return to normal following the July-August uprising, severely impacting investment and business.
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However, there are signs of improvement in remittances, with inflows surging recently, alleviating the dollar crisis and stabilising the exchange rate to some extent. Additionally, the chronic erosion of foreign exchange reserves has come to a halt.
Low growth is expected in the current circumstances. The economy is not operating at full capacity, law and order remains unstable, and the RMG sector is facing challenges. There is some instability in the banking sector, meaning the economy as a whole is not in good shape.
A decline in growth will impact both the economy and public life, but the extent of this impact will depend on which sectors are experiencing a slowdown in activity.
While the country has faced significant flooding, agricultural growth is unlikely to decelerate since the floods have not recurred. If the supply of fertilisers, seeds, and other materials is adequate, the agriculture sector is expected to grow by 3.5% to 4%, similar to previous years.
However, the industrial and service sectors may face disruptions. The manufacturing sector has experienced robust growth over the past seven years; however, this growth has not corresponded with job creation. Thus, while a slowdown in large industrial sectors may not lead to significant job losses, a deceleration in the service sector could decrease people's incomes, which is concerning.
Zahid Hussain is a former lead economist of World Bank Dhaka Office
