World Bank: Bangladesh Growth Expected to Reach 6.7% in FY23

According to the latest Global Economic Prospects report by the World Bank, Bangladesh’s growth forecast will rise to 6.7% in the fiscal year 2022-23 (FY23), despite slowing down in the current FY22. According to the report, growth will pick up due to rising pent-up demand surges, investment recovery and remittance inflows. The report also pointed out that energy subsidies as a share of government expenditure are the highest in Bangladesh, along with the Maldives, and Pakistan.

The report highlighted that the region could face additional pressure from inflation. Global growth is also expected to slump from 5.7% in 2021 to 2.9% in 2022 — significantly lower than the 4.1% that was anticipated in January, the report added.

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According to World Bank President David Malpass, “The war in Ukraine, lockdowns in China, supply-chain disruptions, and the risk of stagflation are hampering growth. For many countries, the recession will be hard to avoid."

He urged govt. to encourage production and avoid trade restrictions. Changes in fiscal, monetary, climate and debt policy are needed to counter capital misallocation and inequality

The report also compared current economic conditions to the stagflation of the 1970s, emphasising how stagflation could affect emerging markets and developing economies.

The current juncture resembles the 1970s in three key aspects: persistent supply-side disturbances fueling inflation, preceded by a protracted period of highly accommodative monetary policy in major advanced economies, prospects for weakening growth, and vulnerabilities that emerging market and developing economies face concerning the monetary policy tightening that will be needed to rein in inflation.

In the report, emerging markets and developing economies, growth is also projected to fall from 6.6% in 2021 to 3.4% in 2022 — well below the annual average of 4.8% from 2011-to 2019.

The report pointed out that govt. needs to have decisive global and national policy action to avert the worst consequences of the war. Furthermore, policymakers should refrain from distortionary policies such as price control, subsidies, and export bans, which would worsen the recent increase in commodity prices.

Prof Mustafizur Rahman, a distinguished fellow of the Centre for Policy Dialogue (CPD), said that the World Bank made this projection based on the emerging global and domestic situation, and he thought it was a realistic one.

He added that the pace of the global economy will depend on how long the ongoing Russia-Ukraine war lasts and its consequences, and the trend of the high prices of the products.