The current account deficit is likely to widen from 0.9 per cent of GDP in FY 2021 to 2.7 per cent of GDP in FY2022 on increase in imports and decline in remittance growth.
The main risk to this growth projection is higher prices for oil and imports, and the loss of export sales beyond those built in the present forecasts, mainly due to the Russian invasion of Ukraine.
“The ongoing socio-economic recovery need to be accelerated by enhancing domestic resource mobilization, incentivising the private sector to create products and services, promoting modern green technologies, and fostering knowledge and innovation,” said ADB country director Edimon Ginting.
“Building climate resilient infrastructure and services, introducing carbon tax on fossil fuels, and promoting green investments will help to further advance the current policy initiatives for managing climate change for inclusive and sustainable green growth,” Ginting added.
The report said that private investment will get stronger, reflecting a solid growth in private sector credit and imports of industrial raw materials and capital goods.
With large available funding, public investment will increase to support the implementation of priority large infrastructure projects. Growth in private consumption, however, may be affected by a decline in remittances.
Inflation is expected to reach 6.0 per cent in FY2022 from 5.6 per cent in FY2021 as price pressures are increasing from upward adjustment in domestic administered fuel prices, rising global food and fuel prices, and implementation of stimulus measures.
The report pointed out that managing climate change is critical to ensure inclusive and environmentally sustainable growth. As part of developing national adaptation plan by the government, a climate risk–informed master plan should be drawn up for each sector and development unit.
Capacity for better accessing and utilizing climate risk analysis needs to be mainstreamed in public financial management decisions across government.
Enabling policies are necessary for green investments, the development and adoption of green technologies, and for greening of existing industries, said the report.