Economy will go back to high growth path next fiscal year: UN

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Bangladesh's economy will return to the high growth trajectory in the next fiscal season overcoming the scarring impacts of the coronavirus pandemic, according to a US report.

The country's gross domestic product (GDP) will grow by 7.6 per cent in the fiscal year of 2021-22 following a 5.1 per cent expansion in today's fiscal year, explained the World Economic Situation and Leads 2021 report made by the United Nations Division of Economic and Community Affairs.

The UN forecast is higher than the projection created by the World Bank and is consistent with that of the International Monetary Fund (IMF).

The WB has said Bangladesh's economy will expand by 3.4 % in the FY22 from 1.6 % in today's fiscal year. The IMF has got forecast 7.9 % growth in the FY22.

The government has reduced the GDP growth projection for the existing fiscal year to 7.4 % considering the fallouts of the coronavirus pandemic.

Achieving resilience to external shocks should be among the most crucial considerations within the decision framework for policymakers in Southern Asia who are rethinking their industrial policies, the report stated.

The report urged the policymakers in South Asia to strengthen their initiatives to formalise labour markets and strengthen their public protection devices to dampen the impact of the crisis on the most vulnerable and improve macroeconomic resilience.

Informal workers account for more than 80 per cent of workers in Bangladesh, India and Pakistan and they have been a lot more exposed to the increased loss of employment than formal staff during the crisis.

South Asia's widespread informality has probably magnified the impact of the pandemic. 

The Covid-19 fiscal response in South Asia has contains a vast random expansion of social assistance and direct cash transfers for the neediest, but this sort of special support is neither enough nor sustainable. 

Policymakers in South Asia, taking inventory of recent lessons, will, therefore, need to design their social protection systems with a good viewpoint to rendering them more inclusive, specifically for those found in the informal sector, and even more flexible and resilient, the UN Desa said.

However, they will need significantly considerably more fiscal space to accomplish most of these goals.

While increased domestic revenue mobilisation could make up for a number of the shortfalls, both bilateral and multilateral creditors will still have to adopt a concessionary stance to avert protracted credit debt crises within an already deeply wounded area.

Several South Parts of asia ran fiscal deficits around 10 % of GDP in 2020, and government debt is usually forecast to grow drastically for most countries.

"Yet, fiscal austerity is not desirable until South Asian countries are back at or near their economical growth potential, which can still take many years," the report said.

Economic growth in Southern Asia on 2021 will be insufficient, at 6.9 %, to make up for the losses of 2020, as pandemic hotspots re-emerge and, more and more, the power of governments to cope with the multitude of challenges becomes exhausted, the UN report said.

While trade, remittances and investment are anticipated to get in 2021, as much of the global overall economy moves towards restoration from the widespread lockdown, investment and domestic intake in many South Asian countries will nevertheless remain subdued due to the continuing threat of the pandemic and the scarring ramifications of the crisis.

South Parts of asia that are relatively extra exposed to global economic conditions, such as Bangladesh and the Maldives with their huge share of foreign trade and Nepal using its reliance on tourism and remittances, will enjoy a stronger rebound.

The recovery is subject matter, on the other hand, to significant risks. The forecasts assume successful containment of the virus in South Asia and all of those other world, including no more lockdowns in 2021, the resurgence of global trade, and the effective continuation of fiscal stimulus and containment efforts in South Asia and different regions.

"Failure of any or many of these base-brand assumptions to materialise could plunge the spot deeper into crisis. Prospects exist as well, but they are not as likely and will be less impactful compared to the downside risks."

The agency said the expansion of new growth sectors, aided by targeted fiscal stimulus and the disruptive effects of the crisis, could propel South Asia's advancement trajectory and invite the region to make up lost ground much more quickly.

"A forceful global commitment to counter the harmful consequences of the pandemic, particularly in growing countries, could also allow the place to build back better and more robust and regain its job as the global production champion."

But to grow rear stronger, South Parts of asia will need first to redouble their work to diversify their economies, while at exactly the same time taking stock of global tendencies initiated by the crisis, such as reshoring of global worth chains (GVCs) and a decreased appetite for contact-intensive services.

The report said monetary diversification is low or minimal in lots of South Asian economies, with the near single-trade economies of Bangladesh (garments), Iran (oil) and the Maldives (tourism) especially subjected to external demand shocks.

Garment shipment makes up about more than 80 % of total annual exports of Bangladesh.

"South Asian governments should promote, specifically, the development of more technical, high-expertise and high value-added sectors that could reach a broader base of trade partners within and beyond South Asia or even the domestic industry," the UN agency explained.

Source: https://www.thedailystar.net

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