The World Bank has lowered Bangladesh's GDP growth projection for the 2023-24 fiscal year to 5.6%, a decrease from its April prediction of 6.2% for the current fiscal year. The downward revision reflects concerns over rising inflation, financial sector vulnerabilities, and global economic uncertainties, according to the latest "South Asia Development Update — Toward Faster, Cleaner Growth" report released Tuesday.
The report also highlighted that Bangladesh's post-pandemic recovery has been disrupted in FY23. Despite this, the country made a strong recovery from the COVID-19 pandemic, supported by an extensive stimulus package and accommodative monetary policy. However, reforms addressing inflation through monetary and fiscal policies will be critical to sustain growth and poverty reduction, the report emphasized.
The World Bank also suggested that a single market-based exchange rate would support the balance of payment and reserve accumulation by attracting foreign currency inflows through formal channels.
In spite of these challenges, Bangladesh has seen significant improvements in living conditions and poverty reduction. Extreme poverty was reduced to 5% in 2022 from 9% in 2016, a progress comparable to Latin America and the Caribbean countries and better than the South Asian average. The new poverty numbers are based on the international poverty line of $2.15 a day (using 2017 Purchasing Power Parity) and data from the Bangladesh Bureau of Statistics’ Household Income Expenditure Survey 2022.
"Bangladesh’s progress in reducing poverty is multidimensional — it has improved poor people’s wellbeing, including in reduced infant mortality and stunting and improved access to electricity, sanitary toilets, and education," said Abdoulaye Seck, World Bank Country Director for Bangladesh and Bhutan.
On a regional level, South Asia is expected to grow by 5.8% this year, the highest growth rate among emerging and developing regions worldwide. However, this growth is slower than its pre-pandemic pace and not enough to meet its development goals. The region's growth is forecasted to slow to 5.6% in 2024 and 2025 as post-pandemic rebounds fade and monetary tightening, fiscal consolidation, and reduced global demand impact economic activity.
Government debt in South Asian countries averaged 86% of GDP in 2022, increasing the risks of defaults, raising borrowing costs, and diverting credit away from the private sector. The region could also be affected by a further slowdown in China’s economic growth and climate change-induced natural disasters.
Martin Raiser, World Bank Vice President for South Asia, emphasized the need for countries to manage fiscal risks and focus on measures to accelerate growth, including boosting private sector investment and seizing opportunities created by the global energy transition.
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