Bangladesh's economic outlook still clouded by uncertainties: Cenbank

The Bangladesh Bank (BB) in its latest annual report has sounded a caution stating that some headwinds to economic growth and inflation outlook could emerge from external factors despite a resilient economic recovery that prevailed in FY22.

The BB report reads, "The strong recovery in economic activities is expected to prevail during the coming years. However, this growth and inflation outlook is clouded by some uncertainties like pass-through effects of higher global commodity and energy prices into domestic wage and production costs, and potential loss of export demand in Europe caused by the Russia-Ukraine war driven economic slowdown and exchange rate volatility from growing current account deficits."

The central bank's annual report for FY2021-2022, published on Monday, advised the necessary harmonization of domestic monetary and fiscal policies with the world's current best practices to reap favourable outcomes against external shocks.

BB's further recommendation suggested adopting cautious and prudent monetary and fiscal measures in the near term to ensure overall macroeconomic stability in the country.

Earlier on 15 January (Sunday), BB outlined three specific external challenges that must be addressed and overcome in its new monetary policy for the second half of FY2022-23.

According to BB, the near-term economic outlook for the country seems "quite stable" but depends on three external issues.

The three external factors are – (i) the length and intensity of the Russia-Ukraine war, (ii) the spree of interest hikes by the Fed, and (iii) the re-emergence of Covid-19 and its severity in China.

Improvements in these challenges will expedite Bangladesh's future economic gains, said the central bank, adding that in case of any adverse consequences of the above-mentioned external issues, the country's economy has enough resilience to remain insulated in its current condition.

According to the latest report, the country's economic recovery, amid the impacts of the prolonged Covid-19 pandemic and ongoing Russia-Ukraine war, remained buoyant; thanks to the economic activities mainly in the industry and service sectors.

"The resilient recovery was backed by the strong domestic demand reflected in sharp import growth and a continued external demand indicated by hefty export growth."

Meanwhile, BB's growth-supportive monetary policy, an uninterrupted inflow of credit to both the private and public sectors, played a crucial role in the output growth, reads the report.  

Infrastructural development creating investment and employment opportunities across the country and increasing trend of gross investment in both the private and public sectors also leave an optimistic impression on the growth outlook.

Reportedly, the country's GDP growth is projected to be 7.5 percent while keeping inflation at 5.6 percent in FY23.