MasterCard forecasts Bangladesh will achieve 5.7% GDP growth in FY25

Bangladesh's GDP growth will be 5.8% for FY24 and 5.7% for FY25, the Master Card Economics Institute (MEI) has said.

What does it mean?

The MEI's forecast is higher than that of both the World Bank and the International Monetary Fund (IMF). 

●    The World Bank projected Bangladesh's real GDP growth to remain relatively subdued at 5.6% in FY24 and reach 5.7% in FY25.
●    The IMF lowered the economic growth forecast for Bangladesh to 5.7% for the current FY24.

Challenges identified

The MEI also identified the challenges for Bangladesh. Those are:  

●    Weak domestic and external demand
●    Persistently high inflation weighing on consumer purchasing power 
●    US rates could add to external sector vulnerabilities

The inflation issue

The MEI expects inflation to increase to 9.8% year-on-year for FY24 before easing to 8% YoY for FY25. 

David Mann, Chief Economist, Asia Pacific said:

"The USA may cut the policy rate several times this year. If this happens, it would be good news for Bangladesh. Bangladesh's Remittance income is rising in recent months, however the import spending is also rising." 

Syed Mohammad Kamal, country manager of Mastercard, said: 

"Mastercard is bringing 20% of the total remittance of Bangladesh. As per our experiences, introduction of the crawling peg exchange rate regime in May, along with greater alignment between official and unofficial exchange rates, are acting as tailwinds for increased remittances."

Policy rate hikes to fight inflation?

The MEI has forecast that the central bank may hike the policy rate 9% in 2025 from 8.5% to tame inflation. 

Other key findings

Bangladeshi consumers have doubled their share of wallet spending on essentials compared to pre-pandemic levels.
●    This is driven by rising prices of essentials at the cost of discretionary spending 
●    Consumer spending on groceries and electronics see the highest stickiness to digital channels, post pandemic