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Need to address several challenges of Bangladesh economy to continue its growth

Bangladesh economy continues to be among the fastest growing economies in the world due to stable macro and export-oriented industry-led growth, a World Bank report said.

World Bank, Bangladesh Development Update 2019
Figure 1: A World Bank report reveals Bangladesh will witness a 7.3% GDP growth projection in the FY2019.

The country is among the five fastest-growing economies of the world, despite insufficient private sector investment, with a 7.3% GDP growth projection in the FY2019, the report said.

As per the projection of the global lender, Bangladesh is the fifth in the rank of fastest growing economies after Ethiopia, Rwanda, Bhutan, and India respectively. Bangladesh shares the position with Djibouti, Ivory Coast and Ghana. Ethiopia’s GDP is projected to grow by 8.8%, Rwanda 7.8%, Bhutan 7.6% and India 7.5%.

“Initiatives are needed to address several challenges, particularly in boosting private sector investment and diversifying exports. Domestic revenue mobilization is well behind the target so far this year.”

Bob Saum, Country Director, World Bank

On the other hand, according to the Asian Development Bank, Bangladesh’s economy will grow at 8 percent in fiscal 2019. It also said in its outlook for the economy that Bangladesh’s economy is in a good shape and is likely to be the fastest growing economy in ‘Asia and the Pacific’ in its report.

The report ‘Asian Development Outlook 2019’ underlined that Bangladesh must focus on prudent macroeconomic policies, sound debt management, resource mobilization, and strengthening banking sector to achieve the goal of becoming a higher middle-income country and beyond.

Top five fastest growing global economies
Figure 2: Top five fastest growing global economies.

However, Finance Minister AHM Mustafa Kamal said Bangladesh’s economy will grow at 8.13 percent this fiscal year, the highest in its history.

For this rapid growth, the global lender has given credit to the manufacturing industry as well as domestic demand.

Bangladesh’s growth outlook remains strong and stable. Sound macroeconomic policies – such as keeping the budget deficit below 5% of GDP – and resilient domestic demand have led to growth in manufacturing and construction industries on the supply side. On the demand side, growth is led by private consumption and exports, said the World Bank report.

“In addition, the country has substantially improved its electricity generation and a bumper agricultural harvest has further stimulated growth.”

To sustain this progress, the country needs continuity in priority reform areas: financial sector, fiscal, infrastructure, human capital, and business regulation.

The biggest internal risk is in the banking sector, which is ridden with Non-performing Loans (NPLs). Another risk is a shortfall in revenue mobilization, which hinders the implementation of the development budget.

World Bank BD overview 2019
Figure 3: Bangladesh textile and apparel industry is the main driving force of growth.

In the development update, the World Bank has noted that private sector investments in Bangladesh remain weak.

As of now, FDI remains low at less than 1% of GDP. Net FDI inflow amounted to $910 million in the first half of FY19, compared with $823 million in the first half of FY18.

Initiatives are needed to address several challenges, particularly in boosting private sector investment and diversifying exports. Domestic revenue mobilization is well behind the target so far this year, said WB Country Director Bob Saum.

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