Bangladesh's economic outlook broadly optimistic, macroeconomic management sound: ADB

FT ONLINE

The Asian Development Bank (ADB) on Wednesday said the economic outlook of Bangladesh remains broadly optimistic as the country's macroeconomic management was sound with the economy expected to continue to do well.

"Bangladesh economy appears to be in a good shape and is likely to continue to grow," said ADB country Director to Bangladesh Manmohan Parkash while giving his remarks at the launching of the Asian Development Outlook 2018 at its Dhaka office.

ADB Economist Soon Chan Hong made a power-point presentation on the outlook.

The ADB Country Director at first congratulated Bangladesh on attaining the first eligibility for graduation from the Least Developed Country (LDC) status adding that Bangladesh is the lone country which met all three criteria-- gross national income (GNI) per capita of $1,242 or above, human assets index score of 66 or above, and economic vulnerability index score of 32 or below.

"Bangladesh is likely to meet all requirements for graduation in the 2021 triennial review of the UN Committee for development policy," he added.

Parkash said LDC graduation will open up new opportunities like access to resources from the international capital markets, and larger inflows of foreign direct investment (FDI) while some LDC related benefits like duty free quota-free exports, will no longer be available.

"We appreciate that the authorities are fully aware of the opportunities and challenges and are planning for graduation with a momentum," he said.

Parkash said the GDP growth rate of Bangladesh is expected to reach 7 percent in the current fiscal year (FY18) down from 7.3 percent attained in the last fiscal year (FY17). The GDP growth rate in FY16 was 7.1 percent.

The Manila-based lending agency's latest GDP growth projection is however, higher than the recent World Bank's GDP growth projection of 6.5 to 6.6 percent for the current year, but lower then the Bangladesh Bureau of Statistic's (BBS's) provisional growth estimation of 7.65 percent for the current fiscal.

The ADB however, projected a bit higher GDP growth for the next fiscal year with 7.2 percent. Regarding inflation, the lending agency said the inflation rate is likely to remain at 6.1 percent in the current fiscal year which is likely to raise further at 6.3 percent in the next fiscal year.

The ADB said developing Asia to continue solid growth at 6 percent in 2018 and 5.19 percent in 2019 amidst the strong external and domestic demand.

Asked about the BBS's provisional GDP growth estimation of 7.65 percent for FY18, Parkash admitted that the BBS has certainly got the most current data.

"Attaining 7% growth for a continued period of last three years is a very good number. .........7% growth or higher is actually pointing towards a robust economic performance and that's why we're saying we're broadly optimistic about Bangladesh's economy and it will continue to do well," he added.

Replaying to another question about the current implementation status of the Annual Development Programme (ADP), the ADB country Director said in their interaction with the government, they found that Bangladesh is actually putting the right emphasis on ADP implementation.

Referring to a recent tripartite portfolio review meeting, he said that the government is committed as much as the ADB, towards implementing their funded projects timely and with maintaining due quality.

The ADB Country Director said on the supply side, growth was driven by expansion on agriculture and services. Growth in industry was slower, largely on weaker growth in medium and large-scale manufacturing as garment production stagnated.

"The country's macroeconomic management was sound. Inflation moderated to 5.4 % in FY2017 from 5.9% a year earlier, and fiscal deficit was well below the budget target, although the current account fell into deficit," he added.

The ADB Country top boss also cited some areas where Bangladesh needs to make further improvements like the business environment needs to be improved to reduce the cost of doing business, infrastructure investments need to rise significantly to remove the large infrastructure deficit.

He also said large expansion in technical and managerial skills will be needed to diversify the economy and make it globally competitive while revenue reforms will help generate more resources for infrastructure and skills development.

The ADB Country Director also underscored the need for identifying new drivers of growth, diversifying exports away from RMG and promoting labour intensive manufacturing, tapping the potentials of the leather and footwear, light engineering, electronics, pharmaceuticals, jute products, software, ICT products.

He also noted that as per the ADB's comprehensive development plan for southwest Bangladesh economic corridor, southwest region of Bangladesh can propel its total output to $148 billion by 2050, which are 3.3 times higher than the estimate under the normal situation.

Earlier in his presentation, ADB Economist Soon Chan Hong said economic diversification is essential for sustaining high growth, there will be a pick up in exports and a rebound in remittances with the rise in global oil prices, growth is expected to be strong in FY19 as strengthening of exports and remittances continues, sustained high growth demands an expended industrial base and a diversified export basket.