Bangladesh's GDP is expected to grow by 4.5 per cent in FY2020 and 7.5 per cent in FY2021, the Asian Development Bank (ADB) said in the update report of Asian Development Outlook (ADO) 2020 Supplement on Thursday.
The growth forecast for FY2020 reflects sharp decrease in economic activities in the last quarter due to COVID-19 pandemic and its outbreak in Bangladesh, according to a press release.
Bangladesh's economy is expected to recover in fiscal year 2021 after coronavirus induced slowdown in FY2020, according to the latest ADB report of ADO Supplement.
During FY2021, GDP growth rate is expected to pick up to 7.5 per cent driven by gradual recovery in the first two quarters, followed by quick recovery in the following quarters.
These forecasts rest on the assumption that it would take three months, from when the outbreak intensifies in the country, for economies to get their domestic outbreak under control and to start normalising economic activities, it said.
These forecasts also consider the impacts of the government's containment actions, and fiscal and monetary stimulus measures.
"After a robust performance in the first nine months of FY 2020, Bangladesh economy would slow down in near term due to COVID-19 pandemic but is likely to recover in FY2021," said country director Manmohan Parkash.
"Managing the pandemic is a priority and the FY2021 forecast depends on how the recovery shapes up in the coming months," he said.
Appreciating the resilience of Bangladeshi people, Parkash said, the global economic recovery, proactive initiatives to attract investments, creating local employment opportunities, and providing easier access to finance for farmers, entrepreneurs and small businesses could help jumpstart the economy.
"ADB has so far provided $600 million in loans and $1.4 million in grants for managing health emergency and mitigating the initial socio-economic impacts of the pandemic," he added.
"In FY2021, ADB will continue its strong support to help Bangladesh economy recover and rebound from the impacts of COVID-19," said Parkash.
The government's strict containment measures resulted in sharp reduction in consumption, production, and investment in the last quarter of FY2020.
Sweeping global spread of COVID-19 and containment measures in major export markets sharply reduced export earnings. Economic activities are expected to slowly return towards a normal path after restrictions are gradually lifted by the government since June 2020.
In FY2021, gradual recovery is expected to start from the first quarter, aided by the government's stimulus measures in the absence of the recurrence of COVID-19 outbreak.
Afterward, strong manufacturing base and recovery in global economy will enable Bangladesh to experience a quick recovery. However, risks to the outlook are tilted downward, including a prolonged or recurrence of COVID-19 outbreak in Bangladesh and export destinations.
Inflation will stay at moderate levels in FY2020 and FY2021. Inflation is expected to slightly edge up to average 5.6 per cent in FY2020 on higher food prices as well as non-food prices on account of higher domestic natural gas prices.
In FY2021, it will ease to 5.5 per cent on better supply conditions. The inflation forecasts rest on the assumption that potential upward pressure in prices from the COVID-19 pandemic related stimulus measures are expected to be offset by fall in demand from the consumers.