IMF further lowers Bangladesh's economic growth forecast to 5.7%

The International Monetary Fund (IMF) has lowered the economic growth forecast for Bangladesh to 5.7% for the current FY24, down from its earlier projections of 6% in October and 6.5% in April last year.

In its latest edition of the World Economic Outlook released yesterday, the multilateral agency also projected a steady decline in global inflation. However, in Bangladesh, inflation is likely to remain elevated, reaching 9.3% in FY24, up from 9% a year ago.

Dr Ahsan H Mansur, executive director of the Policy Research Institute (PRI), told The Business Standard, "Based on the slowed quarterly GDP growth of Bangladesh at 3.78% in Q2 of this fiscal year, it is unlikely that the growth rate will surpass 4% in the next quarter.

"The IMF's forecast of 5.7% is still relatively high; in reality, the growth rate for the ongoing fiscal year should not exceed 5% or 5.25%."

Earlier this month, the World Bank, in its latest Bangladesh Development Update, warned that the economy will remain stressed in the near term, with real GDP growth expected to slow to 5.6% in FY24. This is due to inflation weighing on private consumption growth, shortages of energy and inputs, rising interest rates, and financial sector vulnerabilities dampening investor sentiment.

The IMF's projection comes after the Asian Development Bank (ADB) in April this year revealed an optimistic growth forecast for Bangladesh's economy, expecting it to edge up to 6.1% for FY24 and 6.6% in FY25 from 5.8% a year ago on resilient export growth.

It also said private consumption is expected to rise with easing inflation, while public consumption is expected to witness moderate growth.

When asked about the relevance and influence of such forecasts by international agencies such as the IMF, the World Bank and the ADB, Dr Mansur said, "No forecast is perfect, and such is the case for all countries. However, economists as well as policymakers of the government do take them into consideration and make use of them for betterment."

The IMF also projected an improved 6.6% economic growth for Bangladesh in the next fiscal 2024-25 and a cooling of inflation down to 6.1%.

Global recovery is steady but slow

Global growth, estimated at 3.2% in 2023, is projected to continue at the same pace in 2024 and 2025.

The forecast for 2024 is revised up by 0.1 percentage point from the January 2024 World Economic Outlook Update, and by 0.3 percentage point from the October 2023 outlook.

"The pace of expansion is low by historical standards, owing to both near-term factors, such as still-high borrowing costs and withdrawal of fiscal support, and longer-term effects from the Covid-19 pandemic and Russia's invasion of Ukraine; weak growth in productivity; and increasing geoeconomic fragmentation," read the report.

Global headline inflation is expected to fall from an annual average of 6.8% in 2023 to 5.9% in 2024 and 4.5% in 2025, with advanced economies returning to their inflation targets sooner than emerging markets and developing economies.

The report said, "Risks to the global outlook are now broadly balanced. On the downside, new price spikes stemming from geopolitical tensions, including those from the war in Ukraine and the conflict in Gaza and Israel, could, along with persistent core inflation where labour markets are still tight, raise interest rate expectations and reduce asset prices."