EIU revises down Bangladesh’s GDP growth to 3.5pc after coronavirus

The Economist Intelligence Unit has revised its forecast about Bangladesh’s GDP (Gross Domestic Product) growth from 7.7 per cent to slightly above 3.5 per cent following the novel coronavirus outbreak across the world.

Earlier in March in its report titled ‘The World in 2020’, the Economist Intelligence Unit (EIU) projected 7.7 per cent growth for Bangladesh in this new year and placed Bangladesh third on its list of top ten highest growth-earning nations.

Following the COVID-19 pandemic, it recently said, “We expect the coronavirus pandemic to dampen economic growth substantially. Preventive measures taken by governments to curtail the movement of people will lead to a demand-side shock to private consumption—the primary driver of economic growth in many South Asian economies. The closure of factories and businesses will result in a supply-side shock, and the subsequent lay-offs will exacerbate the demand shock.”

It warned that given novel coronavirus cases recorded in all South Asian countries and their ‘dense living conditions, low hygiene awareness and overburdened healthcare systems make the region vulnerable to the worst effects of an outbreak.’

It added, South Asian nations will provide fiscal and monetary stimulus and the scope of such measures will vary.

“India and Bangladesh, given their stronger economic positions, will be able to provide relatively more; meanwhile, measures in Pakistan and Sri Lanka will be more limited.

“Monetary policy stimulus in these countries will also be constrained, as the authorities try to limit the depreciation of their currencies and strain on the external account. In the light of this, we will be revising down our GDP growth forecasts for various countries.”

Referring to the 26 March’s video conference among the representatives of the South Asian Association for Regional Cooperation (SAARC) over plans to put up a coordinated fight against the coronavirus, it said, “This came as the region is emerging rapidly as a hotspot for a large-scale outbreak. The number of cases in South Asia has grown swiftly, with Pakistan and India recording the steepest rises. We believe that the number of confirmed cases is being underreported, primarily because of a lack of widespread testing.”

As the crisis worsens, EIU expected the countries to come up with further fiscal and monetary stimulus to be provided by nearly all South Asian countries. The stimulus measures will not be able to support growth, though.

“India and Bangladesh have yet to provide large-scale packages, although we expect them to ramp up stimulus aggressively, given sufficient monetary policy space and manageable public debt and fiscal deficit levels.”