Bangladesh Economy Shows Early Signs of Recovery Amid Uncertainties

Bangladesh’s economy is showing nascent signs of recovery backed by a rebound in exports, strong remittance inflows, and the ongoing vaccination program, says a fresh World Bank report, “Bangladesh Development Update- CONTINUE: Connectivity and Logistics to strengthen Competitiveness,” launched today.

After being severely afflicted by the COVID 19 pandemic-which slowed growth and for the 1st time in 2 decades reversed the poverty reduction trend-the economy is recovering gradually.

Over the first half of FY21, factories reopened and exports rebounded. However, the economy faces elevated risks in the context of the ongoing COVID-19 pandemic.

In Dhaka and Chittagong, the country’s two major cities, recent surveys pointed to a recovery in the labor market in the first half of FY21. With gradual restoration of livelihoods, food security in poor and slum areas improved. In Chittagong, the percentage of adults working had returned to pre-COVID levels by February 2021.

“Regardless of the uncertainty created by COVID-19, the outlook for Bangladesh’s economy is positive. A lot of the pace of recovery will be based upon how fast mass vaccination may be accomplished,” said Mercy Miyang Tembon, World Bank Country Director for Bangladesh and Bhutan. “The World Bank will support a resilient recovery, helping Bangladesh achieve green, smart, and inclusive growth.”

In FY21, growth will 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 near Bangladesh Bank’s 5.5 percent target, and the fiscal deficit is projected to stay at 6 percent of GDP.

Risks to the outlook remain elevated. A fragile global financial 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.

Improving logistics performance may help accelerate the recovery and improve competitiveness. The report outlines opportunities to modernize the logistics system to ensure business continuity and build resilience. This is often achieved through a system-wide technique to increase logistics efficiency; increase the quality, capacity, and management of infrastructure; enhance the quality and integration of logistics services; and, achieve a seamless integration of regional logistics services.

“The COVID-19 pandemic has resulted in an unpreceded global recession,” said Bernard Haven, World Bank Senior Economist, and co-author of the report. “Protecting households damaged by the pandemic remains an urgent priority, while structural reforms might help accelerate the recovery.”

The Bangladesh Development Update is a companion piece south Asia Economic Focus, a twice-a-year World Bank report that examines economic developments and prospects in the South Asia Region, and analyzes policy challenges faced by countries. The Spring 2021 edition titled South Asia Vaccinates, launched on March 31, 2021, implies that monetary activity in South Asia is bouncing back, but growth is uneven, recovery remains fragile, and the financial outlook is precarious. The report also targets different dimensions of vaccine deployment and a cost-benefit analysis of vaccination in your community.