October 7, 2022
DHAKA – The World Bank today slashed growth forecast for Bangladesh by 0.6 percentage points to 6.1 per cent for the current fiscal year ending in June 30, 2023, impacted by global economic slowdown and the war in Ukraine.
The multilateral lender predicted 6.7 per cent growth of Bangladesh’s economy in June this year.
Now it revised down its prediction further, which would be lowest since the nation’s gross domestic product (GDP) growth fell to 3.45 per cent in the fiscal year 2019-20 owing to the Covid-19 pandemic.
Not only Bangladesh, the WB also cut its forecast regarding growth of other South Asian economies namely India, Pakistan, Sri Lanka and Maldives.
It raised economic growth outlook for Nepal in its “South Asia Economic Focus”.
The agency projected regional growth to average 5.8 per cent this year, a downward revision of 1 percentage point from the forecast made in June this year.
This follows growth of 7.8 per cent in 2021, when most countries were rebounding from the pandemic slump, it added.
“South Asia faces an unprecedented combination of shocks on top of the lingering scars of the Covid-19 pandemic,” said the WB.
While economic distress is weighing down all South Asian countries, some are coping better than others.
Exports and the services sector in India, the region’s largest economy, have recovered more strongly than the world average while its ample foreign reserves served as a buffer to external shocks, it added.
The return of tourism is helping to drive growth in Maldives, and to a lesser extent in Nepal—both of which have dynamic services sectors.
It said the combined effects of Covid-19 and the record-high commodity prices due to the war in Ukraine took a heavier toll on Sri Lanka, exacerbating its debt woes and depleting foreign reserves.
Plunged into its worst-ever economic crisis, Sri Lanka’s real GDP is expected to fall by 9.2 per cent this year and a further 4.2 per cent in 2023.
High commodity prices also worsened Pakistan’s external imbalances, bringing down its reserves.
After devastating climate-change-fuelled floods submerged one-third of the country this year, Pakistan’s outlook remains subject to significant uncertainty, said the bank.
The WB predicted that Pakistan’s economy to grow by 6 per cent down from its June forecast of 8 per cent.
India’s economy will grow 6.5 per cent in the fiscal year 2022-23, down by 0.1 percentage points.
“Pandemics, sudden swings in global liquidity and commodity prices, and extreme weather disasters were once tail-end risks. But all three have arrived in rapid succession over the past two years and are testing South Asia’s economies,” said Martin Raiser, World Bank’s vice president for South Asia.
“In the face of these shocks, countries need to build stronger fiscal and monetary buffers, and reorient scarce resources towards strengthening resilience to protect their people.”
Inflation in South Asia, caused by elevated global food and energy prices and trade restrictions that worsened food insecurity in the region, is expected to rise to 9.2 per cent this year before gradually subsiding.
The resulting squeeze on real income is severe, particularly for the region’s poor who spend a large share of their income on food, the WB added.