IMF lowers growth forecast to 6.5%
The International Monetary Fund yesterday reduced the economic growth forecast for Bangladesh to 6.5 percent for the current fiscal year from its April projection of 7.5 percent.
It came as the IMF said the outlook for low-income developing countries had darkened significantly due to the worsening dynamics of the coronavirus pandemic.
The Washington-based multilateral lender featured the projection in its latest World Economic Outlook (WEO) report. The projection is below the government’s target of 7.2 percent for fiscal 22.
The report also predicted that Bangladesh’s gross domestic product (GDP) may have grown 4.6 percent in the last fiscal year, up from 5 percent according to previous estimates.
The government’s provisional GDP growth figure for fiscal year 21 is 5.47 percent. Economic growth is expected to jump to 7.1% in FY26, according to the IMF.
The estimate is in line with the projection made by the World Bank, which said last week that GDP will grow 6.4 percent this fiscal year.
The IMF has reduced the projection for global growth to 5.9 percent for this year, in contrast to its previous estimate of 6 percent. However, it left global growth unchanged at 4.9 percent for the following year.
“The global recovery continues, but momentum has weakened, hampered by the pandemic,” the report said.
In South Asia, India’s growth forecast remained unchanged at 9.5% for 2021 and 8.5% for 2022.
Nepal is expected to grow 1.8% in 2021 and 4.4% in 2022, while the Maldives will experience staggering growth of 18.9% this year and 13.2% next year.
The Sri Lankan economy is expected to grow 3.6 percent in the fiscal year and 3.3 percent in the following fiscal year. Pakistan will have a GDP growth rate of 3.9 percent in FY21 and 4 percent in FY22.
The IMF has said Bhutan’s economy will contract 1.9% in 2021 before returning to 4.2% growth next year.
Pandemic outbreaks in critical links in global supply chains have resulted in longer-than-expected supply disruptions, the lender says, further fueling inflation in many countries.
“Overall, the risks to the economic outlook have increased and political compromises have become more complex.”
Partly offsetting these changes, the projections of some commodity exporters have been revised upwards due to rising commodity prices.
If higher inflation takes hold, it could force central banks to react aggressively, and higher interest rates will slow the recovery, the IMF has warned.
“Central banks must be prepared to act quickly if the risks of rising inflation expectations become greater in this unexplored recovery,” said IMF chief economist Gita Gopinath.