Bangladesh's economic growth to slow to 5.6% in FY24: UN

TBS Illustration

The real GDP growth in Bangladesh is expected to slow to 5.6% in the ongoing fiscal 2023-24, down from an estimated 6% growth a year ago, says the United Nations.

The UN's flagship economic report titled "World Economic Situation and Prospects (WESP) 2024," released on 4 January, also projected a slightly improved 5.8% economic growth for the country in FY25.

The World Bank in its October outlook last year also forecasted the same growth figures for Bangladesh for FY24 and FY25, indicating reforms to address inflation, through monetary and fiscal policies, as well as financial sector vulnerabilities will be critical for the country to sustain growth and poverty reduction.

The UN's projection comes after the Asian Development Bank (ADB) in December last year cut the growth forecast for Bangladesh's economy to 6.2% for FY24.

Before the ADB, the International Monetary Fund (IMF) lowered the economic growth projection for the South Asian nation to 6% for the current fiscal year.

Meanwhile, despite initially aiming for a 7.5% GDP growth target in the FY24 national budget, the government has revised it downwards to 6.5%.

The UN report presented a sombre economic outlook for the near term. Persistently high interest rates, further escalation of conflicts, sluggish international trade, and increasing climate disasters, pose significant challenges to global growth, it said.

"In Bangladesh, real GDP growth is expected to slow in 2024, whereas economic growth in Nepal is projected to improve," said the UN report.

Global economic growth is projected to slow from an estimated 2.7% in 2023 to 2.4% in 2024, trending below the pre-pandemic growth rate of 3.0%.

Weakening global trade, high borrowing costs, elevated public debt, persistently low investment, and mounting geopolitical tensions put global growth at risk, read a press release issued by the UN.

Meanwhile, South Asia's economic growth is forecasted to remain robust at 5.2% in 2024, albeit slightly lower than the estimated 5.3% in 2023, driven by a strong expansion in India, which remains the fastest-growing large economy in the world.

Tight financial conditions and fiscal and external imbalances will continue to weigh on growth in South Asia in the near term, the UN report said.

In addition, geopolitical tensions – including the ongoing war in Ukraine and the conflict in Western Asia – will expose net-oil-importing countries in the region to the risk of sudden spikes in oil prices, it said.

As the region is highly vulnerable to extreme weather conditions, the return of the El Niño climate phenomenon will also pose a significant risk to the economic outlook, read the report.

In South Asia, inflation is projected to ease to 9.2% in 2024 from an estimated 13.4% in 2023 as domestic demand softens, international commodity prices stabilise, and local currency depreciations ease.

The UN projected that Bangladesh will see a decline in inflation to 6.8% in 2024 from an estimated 9.6% in 2023.

However, potential increases in commodity prices and the adverse impact of extreme weather events could disrupt the pace of disinflation and increase risks of food insecurity in the region, read the press release.

António Guterres, United Nations Secretary General, said, "2024 must be the year when we break out of this quagmire. By unlocking big, bold investments we can drive sustainable development and climate action, and put the global economy on a stronger growth path for all.

"We must build on the progress made in the past year towards an SDG Stimulus of at least $500 billion per year in affordable long-term financing for investments in sustainable development and climate action."