Govt dev projects to lead Bangladesh’s growth in FY22: StanChart

Bangladesh's economic growth will be led by government-run development projects in the current fiscal year as private sector credit growth still remains slow, according to top economists of Standard Chartered.

The private sector credit growth may rise in the coming months if the Covid situation remains under control and vaccination goes up to the mark, they said at a virtual event titled "Global Research Briefing (GRB) Bangladesh 2021 Media Session" on Thursday.

However, they said they are not confident enough that this growth will be notable before March-April of next year.

Saurav Anand, an economist of Standard Chartered for South Asia, said it is not only in Bangladesh, but the global scenario is also the same.

"Bangladesh's credit growth is 8.5%, while India's is closer to 6%. The private sector is resisting investment in terms of higher capacity building," he pointed out.

So, this year investments will be mostly driven by the government. Mega infrastructure projects from the government side are what will drive the investment part of economic growth, said Anand.

Private sector credit rose to 8.42% in August from 8.38% in July, according to the Bangladesh Bank. The July figure also improved by 0.40 percentage points from June although it was still 6.8 percentage points lower than the central bank's target.

The Bangladesh Bank in its monetary policy for the current fiscal year has set the target of private sector credit growth at 14.8%.

Anand further said, "There are so many projections, but I think if the Covid situation does not get worse, it will surely go to 7% plus growth in this fiscal year. So far, we see the country's economy stands at $350 billion and it will reach $500 billion by 2026."

Naser Ezaz Bijoy, chief executive officer at Standard Chartered Bangladesh, said, "As the vaccination drive continues, the economy is set to accelerate."

There are significant opportunities such as technology adoption and inclusiveness through mobile-based solutions and the ITeS [IT-enabled Services] sector, while growth-supportive policy focused sectors will continue to spur private investment and foreign direct investment."

Planning Minister MA Mannan said, "We remain as committed as ever in fostering a business-friendly climate so that we can continue our journey of inclusive progress and prosperity."

Eric Robertsen, global head of research and chief strategist of Standard Chartered, said pandemic-affected global export has almost returned to pre-pandemic level. "The speed of recovery has been much faster."

There are some significant risk factors, such as global debt deflation, associated with such a positive recovery in global trade, he said, adding, "In the global market, there are some inflationary problems with prices of crude oil, copper and natural gas rising."

Divya Devesh, head of Asa FX Research at Standard Chartered, said Taka is still best in the Asian market as Bangladesh is recovering from pandemic-induced economic downturn riding on high remittances, exports and reserves. So, Taka will outperform other Asian currencies in the coming days.

Bangladesh is on the path of returning to normalcy after a pandemic-hit period, with its exports having raked in $38.75 billion in FY21, the receipts amounted to $33.67 billion in FY20.

Recent studies show a ray of hope that the country can earn $22 billion more annually if liberal market access is utilised with diversified items.

On the other hand, remittance inflow dipped by 19.75% to $1.73 billion year-on-year in September, which was also the lowest in 16 months. Bangladeshi expatriates sent home $2.15 billion in September last year.

The amount remitted in September this year was 4.63% lower than the August earnings. In July-September of Fy22, total remittance inflow amounted to $5.40 billion, down from $6.71 billion during the same period last fiscal year.

The StanChart economists said recent Taka depreciation has been in line with their expectations.

They also said GDP growth will recover in FY22 on the back of domestic consumption and global growth rebound.

Stating that vaccination will continue to be a key driver, they said if vaccination continues at the current pace, StanChart expects a 70% vaccination threshold by June 2022.

The World Bank on Wednesday projected a 6.4% growth in the current fiscal year for Bangladesh. Meanwhile, growth for the next fiscal year was estimated at 6.9%, while StanChart economists forecasted that growth will sustain at over 7% during FY22-26, and per capita to $3,000 by FY26.