Bangladesh's GDP growth to stay below pre-pandemic level even in FY27: IMF

Despite an air of optimism, gloomy days will linger for a few more years before the pall lifts, according to projections by the International Monetary Fund (IMF).

The money-lender has projected a 6.5%  Gross Domestic Product (GDP) growth for Bangladesh in FY24, which is below the government's target of 7.5%.

A press release issued approving the $4.7 billion loan sought by Bangladesh also said the growth in the country's GDP would remain below the pre-pandemic highs of 7.9% for the next several years.

It would pick up again in the Fiscal Year (FY)-27, reaching 7.4%.

But before that, several critical indicators will see a few years of downward trends. 

Although in a positive sign, the IMF expects inflation to fall from 8.9% in FY23 to 6.5% at the end of FY24, reaching 5.5% in FY26, this cooling-off period will be driven by dampening consumption as well. 

According to the IMF, consumers who are already stretching pennies will spend even less in the next two years. 

Private consumption growth will fall from 7.6% to 6.5% in FY24. In FY25, this will fall even lower to 4.1%, rising from FY26.

Despite the ongoing dollar crisis, Bangladesh's foreign exchange is expected to improve to $34.2 billion in the next fiscal year, up from the latest fiscal's $30 billion. It will reach $46.4 billion at the end of FY26. 

It will cross the $53 billion mark at the end of FY27.

However, government projections on forex reserves for the next three fiscals are a bit higher – $38.14 billion for FY24, $41.04 billion for FY25 and $48.29 billion for FY26.

Besides, remittance inflow as share of GDP is expected to experience a downward trend from the next fiscal. IMF projection for FY24 is 4.9%, for FY25 4.6%, FY26 4.4% and for FY27 it is 4.1%.

Remittance inflow for the current fiscal year now stands at 5.1% of GDP.

Meanwhile, other key economic indicators such as – current account balance, trade balance, service balance and income balance – will continue to deteriorate in the next fiscal. Still, things are to improve from there on till FY27.

As per the IMF estimates, the country's current account balance will go down to -4.2% from the-3.2%, trade balance to -8.4% from -7.6%, and service balance to -0.9% from -0.8%.

The IMF yesterday approved a loan of $4.7 billion for Bangladesh, calling for ambitious reforms to achieve more resilient, inclusive, and sustainable growth.

Bangladesh is getting about $3.3 billion under the Extended Credit Facility (ECF) and the Extended Fund Facility (EFF) and about $1.4 billion under the Resilience and Sustainability Facility (RSF).

With this, Bangladesh became the first country in Asia to receive a loan from IMF's RSF.