Wednesday, September 25th, 2019

ADB foresees Bangladesh’s continuation as fastest growing economy

Published 6:50 pm | September 25, 2019

The economy of Bangladesh is in good shape and it is likely to continue as the fastest growing economy in Asia and the Pacific, said the Asian Development Bank. “However, such momentum needs to be sustained in the medium-to-long-term to achieve its goal of becoming an upper middle-income country and high- income country,” said ADB Country Director Manmohan Parkash.

The ADB Country Director said this while releasing the “Asian Development Outlook 2019 Update: Fostering growth and inclusion in Asia’s Cities” held at its office in the city’s Agargaon area. Senior Economist of ADB Soon Chan Hong made a power-point presentation on the occasion.

The ADB Country Director said based on the strong performance of 8.1
percent in the last fiscal year (FY19), the GDP is expected to grow by 8
percent in the current fiscal year (FY20) in Bangladesh with continued
buoyant exports, robust private consumption with higher remittances,
accommodative monetary policy, ongoing reforms to improve business climate or
private investment, and public infrastructure investment. The growth was 7.9
percent in FY18.

The update indicated that the growth projection has been downsized at 6
percent for China, 7.2 percent for India, 2.4 percent for Korea, 2.8 percent
for Pakistan, 3.2 percent for Thailand. “On the supply side, sustained strong
growth in industry and agriculture are expected to be the main drivers of
growth in FY2020,” he added.

Highlighting the challenges that Bangladesh needs to face in the coming
years, Manmohan said the country requires expanded industrial base, a
diversified export basket, equitable development in urban and rural areas and
a sound financial system.

“Further, the authorities must speed up reforms to improve the business
environment for vibrant private sector development. The implementation of the
VAT law is a welcome development, however further expansion of the tax base
and promotion of efficient tax administration are required for improved
resource mobilization. Bangladesh also needs to further develop human capital
to meet the growing needs from the private sector,” he added.

The ADB Country Director said Bangladesh will require continued focus on
prudent macroeconomic policies, sound debt management, resource mobilization,
and strengthening of the banking sector.

“The government should continue its support in removing infrastructure
constraints, promoting skills development, and improving the cost of doing
business. All these measures will help the government achieve its long-term
vision,” he added.

The ADB update showed that on the supply side, strong expansion in
industry and services lifted the robust growth. Pick up in exports due to
stronger demand in the US and some newer markets led to the brisk production
in large and medium-sized industries.

On the demand side, higher net exports and strong private consumption
supported by a record remittance of $16.4 billion contributed much to the
higher GDP growth.

“The country’s macroeconomic management remains generally sound. Inflation
moderated to 5.5 percent. Although budget revenue is expected to underperform
its target, the fiscal deficit is expected to remain within the budget
target. The current account deficit narrowed due to acceleration in exports
and slowing in import demand,” said the ADB Country Director.

Referring to a study carried out by the ADB last year which will be
shortly released, the ADB Country Director said the southern part of
Bangladesh after the completion of the Padma Bridge would lead to $148
billion of additional GDP to the country provided the government is able to
bring in investments in infrastructures and in human capital.

Answering to a question on the capital market, he said that financial
literacy and investors’ protection can help mitigate many risks in the
capital market.

The ADB Country Director also underscored the need for converting the
‘demographic boom’ into ‘demographic dividend’ in Bangladesh and also to
convert the countrywide 100 special economic zones in such centres where
trade redirection benefits flow in to labour-intensive manufacturing

Replying to another question, Manmohan said the trade tensions between the USA and China is benefitting Bangladesh, but the country needs to diversify its export basket like Vietnam.


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