World Bank keeps Bangladesh GDP growth unchanged at 5.2% in FY23

The World Bank, in its latest June edition of Global Economic Prospects, has kept Bangladesh's gross domestic product (GDP) growth unchanged at 5.2% in the current fiscal year.

"In Bangladesh, elevated inflation, policy uncertainty, and weakening external demand are expected to slow growth to 5.2% in FY23 from 7.1% in the previous fiscal year," the World Bank said in its flagship report released on Tuesday.

Gains in market share in key export markets are expected to sustain export growth, offsetting the effects of weaker growth in advanced economies, the report said.

"Growth is projected to accelerate to 6.2% in FY24 as inflationary pressures ease, reform implementation accelerates, and transportation and energy infrastructure megaprojects are completed," the report said.

Import restrictions imposed in Bangladesh adversely affected economic activity, and have been relaxed as external imbalances have improved and exchange rate pressures have eased, it said.

Food export bans, however, are expected to remain in place through 2023 despite falling global prices, it added.

According to the Washington-based lender, in Bangladesh, continued import suppression measures and energy shortages have weighed on both industrial production and the services sector. Real household earnings are yet to recover to pre-pandemic levels despite an improvement in employment.

"A policy programme supported by the International Monetary Fund (IMF) — approved in January — aims to pre-emptively address further balance of payments pressures and help unwind import suppression measures," it added.

Risk concerned

While global growth has slowed sharply and the risk of financial stress in emerging markets and developing economies is intensifying amid elevated global interest rates.

The Washington-based lender expressed concerns that financial sector risks remain elevated in Bangladesh, with high levels of non-performing loans, weak capital buffers, and weak bank governance. Ratios of non-performing loans to total loans are elevated and have recently been rising. 

It also mentioned that weak corporate governance and capital buffers also increase the risk of stress in the financial sector.

Global economy on precarious footing amid high-interest rates

Global growth is projected to decelerate from 3.1% in 2022 to 2.1% in 2023. In emerging markets and developing economies other than China, growth is set to slow to 2.9% this year from 4.1% last year. These forecasts reflect broad-based downgrades.

"The surest way to reduce poverty and spread prosperity is through employment—and slower growth makes job creation a lot harder," said World Bank Group President Ajay Banga. 

"It is important to keep in mind that growth forecasts are not destiny. We have an opportunity to turn the tide but it will take us all working together," Ajay Banga added.