The World Bank (WB) projected Bangladesh's economic growth at 6.4 per cent in the current fiscal, one-per cent down the government-set target for some risks.
For the current financial year (FY), 2017-18, the government has taken a target to achieve 7.4 per cent Gross Domestic Product (GDP) growth on the back of socioeconomic-development recipe its has put in place.
Sounding a bit downbeat about the growth prospect in its Global Economic Prospect (GEP) report, released Wednesday, the Washington-based lender cited some risk factors for Bangladesh. Slippages relating to the upcoming elections and weak tax revenues "could derail fiscal consolidation efforts", it says about the drawbacks.
Debt burdens borne by corporate houses and growing nonperforming loans also came into reference as the downside of the economy.
"Corporate debt overhangs and high levels of nonperforming loans have been longstanding concerns in some countries (e.g. Bangladesh, India)," the WB said.
The WB GEP report said setbacks in efforts to resolve these domestic bottlenecks would continue to weigh on investment, and more broadly on medium-term growth prospects in the South Asia region.
Asked about such a conservative growth projection, WB Lead Economist Dr Zahid Hussain listed four reasons that might affect achieving the higher target of 7.4 per cent in the current fiscal.
Among the reasons he cited, vulnerability in the banking sector, deficiency in infrastructure development, disruption to normal economic activities due to the upcoming national elections and absence of expected policy and institutional reforms by the government are the key ones.
"Only 17 economies in the world are expected to grow at 6.0 or beyond 6.0 per cent rate in the current FY. If Bangladesh grows at WB-projected 6.4 per cent rate, it will be a commendable achievement," the World Bank economist told journalists.
The WB, however, forecasts that activity in Bangladesh would grow at an average of 6.7 per cent a year over FY2018- FY2020, benefiting from strong domestic demand and strengthening export.
In further prediction the WB says Bangladesh's economic growth could be 6.7 per cent in the next fiscal year, FY2019.
The World Bank in its GEP report said: "Low interest rates and improved infrastructure are expected to lift investment. Remittances are expected to rebound as the growth firms in Gulf Cooperation Council (GCC) countries and support private consumption."
In the last FY2017, Bangladesh's economy grew at a rate of 7.28 per cent by the Bank's count.
About last year's achievement, the WB said: "The GDP growth in FY2017 was 7.2 per cent, exceeding the June forecast owing to higher-than-expected outturns in the manufacturing and services sectors. Robust private consumption was complemented by strong public investment growth."
Growth in large commodity importers accelerated (e.g., Pakistan, Thailand, Vietnam), or remained strong (e.g., Bangladesh, India, the Philippines), despite some disruptions related to idiosyncratic factors (e.g., adjustment to the new Goods and Services Tax in India, floods in Bangladesh, slower progress in the implementation of public investment projects in the Philippines), it said.
About the regional growth prospect, the WB report says growth in the region is expected to pick up to 6.9 per cent in 2018, and stabilise around 7.2 per cent over the medium term, but remain slightly below June projections due to the weaker-than-expected recovery on the domestic front.
Turning to inflation, a major indicator of an economy's health, the GEP report says inflation has been well below its historical average in the South Asia region, except for a drought-related temporary rise in 2017 in Sri Lanka.
Outside India, fiscal consolidation slowed in 2017 as a result of revenue shortfalls and increased government spending, particularly in the Maldives and Pakistan.
Current-account deficits gradually widened across the region, especially in India, Bangladesh and Pakistan, it said.
"Balance-sheet weakness for corporates (e.g., India) and financial sectors (e.g., Bangladesh, India) continued to weigh on private investment," the Bank report added.
In particular, non-performing-loan ratios remained high, at around 10 per cent, despite progress in some countries like the Maldives, Pakistan and Afghanistan).
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