The World Bank has kept its projection of Bangladesh's economic growth unchanged at only 1.6% for the fiscal year 2020-21 in the latest report released yesterday.
The forecast in the January 2021 Global Economic Prospects report is in stark contrast with the optimistic outlook of two other global lenders – the Asian Development Bank (ADB) and the International Monetary Fund (IMF) – as well as with the government's own projection.
The World Bank, however, forecasts 3.4% growth of Bangladesh's gross domestic product (GDP) in the next fiscal year, expecting a widespread rollout of Covid vaccines.
It said the remittance inflow had a double-digit growth in 2020 due to the increased use of formal channels to send money home, government incentives, and the return of many migrant workers. The export growth in Bangladesh is forecast to remain weak, especially in the readymade garment sector.
In September last year, the ADB predicted that Bangladesh would have a strong economic recovery in the current fiscal year with 6.8% GDP growth. A month later, the IMF announced its projection of 4.4% economic growth of Bangladesh for fiscal 2020-21.
Around the same time, the World Bank predicted Bangladesh's economy to slow down to 1.6% for the lingering impact of Covid-19.
The projection remains the same as, the World Bank said, the economy "is estimated to have decelerated to 2.0% in the fiscal year of 2019-20."
But the government announced 5.24% growth – the highest in South Asia and among the low-income countries globally – in that year.
In December, as per the eighth five-year plan, the Bangladesh government set a target to achieve 7.4% economic growth in the current fiscal year, while the annual budgetary target remains unchanged at 8.2%.
Global economy to expand
The World Bank said the global economy is expected to expand 4% in 2021 after a 4.3% contraction in 2020. The growth is projected to be 3.8% in 2022.
Rising Covid-19 infections and delays in the vaccine distribution could limit the recovery to just 1.6% this year, it warned.
The World Bank's semi-annual forecast showed that the economic slowdown inflicted by the pandemic had been slightly less severe than the previous forecast, but the recovery was also subdued and still subject to considerable downside risk.
In a positive scenario, the global growth could accelerate to nearly 5%, with successful control of the disease through a faster vaccination process.
South Asia's economic outlook
In South Asia, the economic output shrank by an estimated 6.7% in 2020, reflecting the effects of the pandemic and the nationwide lockdowns, particularly in Bangladesh and India, the World Bank said.
However, economic activities in the region are expected to expand by 3.3% in 2021, down from the projected 4.5%.
The World Bank estimated India's economic growth to contract by 9.6% in fiscal year 2020-21 (April to March) and to recover to 5.4% in fiscal year 2021-22.
The Maldives, where tourism accounts for a large share of its GDP, is estimated to contract by 21.5% in 2020 and to achieve 9.5% growth in 2021.
Bhutan is projected to see a 0.7% contraction of its economic growth in fiscal year 2020-21 (July to June), and to grow to 2.3% in the next fiscal year.
Nepal and Pakistan are expected to register economic growth of 0.6% and 0.5% in fiscal year 2020-21 and to grow 2.5% and 2% in the next fiscal year.
The World Bank noted that the economies that rely on external sources, such as manufacturing exports (Bangladesh) and tourism (Bhutan, Maldives, Nepal, Sri Lanka), the recovery is likely to be modest.
A rebound is likely to be muted, unless policymakers act decisively to tame the pandemic and introduce investment-enhancing reforms, the World Bank said.