Bangladesh Bank projects V-shaped recovery

With lingering pandemic in the backdrop, the Bangladesh Bank targets an ambitious 8.2% economic growth for the current fiscal year, accompanied by a V-shaped recovery.

"The successful and timely implementation of the stimulus packages" will help the economy rebound strongly, the central bank said in the 2019-20 annual report published yesterday.

A V-shaped recovery is characterised by a quick and sustained recovery in measures of economic performance after a sharp economic decline.

The Bangladesh economy was expanding at an accelerated growth supported by broad-based economic activities until February last year, according to the report. The country achieved a record 8.15% growth, the highest in the Asia-Pacific region, in the fiscal year 2019.

But economies around the globe ground to a halt by March 2020 and the confirmation of local cases of infection hindered the goal of achieving the GDP growth of 8.2% in fiscal year 2020. According to the provisional estimate by BBS, Bangladesh's real GDP growth of the fiscal year was recorded at 5.2%.

The subdued growth was still the highest in the South Asian region.

Earlier in October last year, the World Bank forecast U-shaped recovery for Bangladesh, saying that it would be realised if the government spent proactively and could tap international resources.

U-shaped recoveries happen when a recession occurs and the economy does not immediately bounce back but tumbles along the bottom for a few quarters.

BB's projection of this fiscal year goes in line with the current economic indicators. For example, energy consumption, a key parameter linked to economic growth, crossed the pre-pandemic level.

The consumption of fuel oil, electricity, and gas dipped in April last year after a countrywide shutdown had been put in place to contain the contagion, and it started picking up with the gradual reopening of businesses in May.

Fuel oil consumption that fell to 6,000 tonnes per day during that time has now gone up to 14,000 tonnes, higher than the average consumption of 13,500 tonnes before the pandemic.

The use of electricity jumped to 700 crore kilowatt-hour (kWh) and gas use exceeded 250 crore cubic feet a month -- both above their pre-pandemic levels, a finance ministry paper showed.

In the latest monetary policy review report, the central bank expected that the second wave of the pandemic would not harm the economy severely.

Besides, the vaccine rollout will have a positive impact on the global as well as local economy. 

The BB report said it took a series of timely and appropriate initiatives, such as stimulus packages of more than Tk 1.21 lakh crore, policy relaxations, and low-cost refinancing schemes to support weaker segments of the economy and to ensure sufficient liquidity in the banking system

That helped Bangladesh remain at the forefront among the South Asian economies. It attained 5.2% growth in FY20, while the growth rates of India, Pakistan, and Sri-Lanka are expected to be negative in 2020.

The industry and service sectors have also been boosted by supportive policy measures of the government and the BB.

The industry sector has demonstrated a magnificent turnaround with a faster-than-expected growth of 7.94% in the first quarter of fiscal 21, according to the Quantum Index of Industrial Production (QIIP), a gauge of measuring the contributions of various industrial sectors to the economy.

Mostly, the manufacturing sector led by apparel, textile, pharmaceuticals, non-metallic mineral product, leather and related products and chemical production spurred the QIIP.

The services sector also climbed out of the grave induced by the pandemic. Cargoes handled by the Chattogram port started increasing sharply after May 2020 and came back to the pre-pandemic level in November 2020, according to the BB report.