Bangladesh’s economy is showing nascent signs of recovery backed by a rebound in exports, strong remittance inflows, and the ongoing vaccination programme.
This has been reflected in a new World Bank report, “Bangladesh Development Update- Moving Forward: Connectivity and Logistics to strengthen Competitiveness,” launched on Monday.
After being severely affected by the Covid-19 pandemic – which slowed growth and for the first time in two decades reversed the poverty reduction trend – the economy is recovering gradually, said the report.
Over the first half of the fiscal year 2020-21, factories reopened and exports rebounded.
However, the economy faces elevated risks in the context of the ongoing Covid-19 pandemic, especially the second wave.
“Despite the uncertainty created by Covid-19, the outlook for Bangladesh’s economy is positive. Much of the pace of recovery will depend on how fast mass vaccination can be achieved,” said WB Country Director Mercy Miyang Tembon.
“The World Bank will support a resilient recovery, helping Bangladesh achieve green, smart, and inclusive growth.”
According to the report, in Dhaka and Chattogram – the country’s two largest cities – recent surveys pointed to a recovery in the labour market in the first half of the financial year.
With gradual restoration of livelihoods, food security in poor and slum areas improved, the report added. In Chattogram, the percentage of adults working had returned to pre-Covid levels by February 2021.
The WB predicted that in FY21, growth would be supported by a recovery in manufacturing as export demand strengthens, a rebound in construction supported by accelerating public investment, and robust service sector growth as the vaccination campaign progress. Inflation is projected to remain close to Bangladesh Bank’s 5.5 per cent target, and the fiscal deficit is projected to remain at 6.0 per cent of GDP.
The report also pointed out that risks to the outlook remain elevated. A fragile global economic recovery could dampen demand for RMG products and limit job opportunities for migrant workers.
The Covid-19 pandemic has exacerbated financial sector risks stemming from nonperforming loans and weaknesses in bank governance and risk management.
The WB report suggested that improving logistics performance could help accelerate the recovery and improve competitiveness.
The report outlines opportunities to modernise the logistics system to ensure business continuity and build resilience. This can be achieved through a system-wide strategy to increase logistics efficiency; improve the quality, capacity, and management of infrastructure; improve the quality and integration of logistics services; and, achieve a seamless integration of regional logistics services, the report added.
“The Covid-19 pandemic has led to an unprecedented global recession,” said WB senior economist and co-author of the report Bernard Haven.
“Protecting households affected by the pandemic remains an urgent priority, while structural reforms can help accelerate the recovery.”
The Bangladesh Development Update is a companion piece to the South Asia Economic Focus, a twice-a-year World Bank report that examines economic developments and prospects in the South Asia Region, and analyses policy challenges faced by countries.