GDP growth to plunge to 33-year low this year
There is absolutely no denying that 2020 is a write-off for the high-flying Bangladesh economy, shot right down to the bottom by the novel coronavirus.
But if the International Monetary Fund's latest projection is known as, 2021 definitively promises to be a much better year, with GDP growth set to be 9.5 per cent.
This season though, the GDP growth will be 2 % growth, the cheapest since 1988, said the Washington-based lender in its biannual World Economic Outlook (WEO), published on Tuesday.
It comes four days following the World Bank forecasted that the country's GDP growth will be between 2 % and 3 % this fiscal year, in a stunning decline from the 8.15 per cent logged within the last fiscal year.
The economy growth would fall further to at least one 1.2 % to 2.9 % in the next fiscal year, said the WB's latest South Asia Economic Focus report, that was released on Sunday.
For Bangladesh, which clocked in the highest monetary growth in Asia in 2019, it had been a crushing blow, as the federal government was hoping to join up 8.20 % GDP growth in the beginning of the fiscal year.
Finance Minister AHM Mustafa Kamal though remains sanguine, insisting that the economy would grow by at least 6 % in fiscal 2019-20.
The IMF's growth projections derive from calendar years and the ones of the WB derive from fiscal years.
The projection from the IMF is a sharp decline from its previous forecast made in its World Economic Outlook report in October last year when the lending company said Bangladesh's monetary growth would be 7.4 % in 2020.
It isn't only Bangladesh that has been bearing the brunt of the deadly novel coronavirus.
In South Asia, only Bhutan, with a forecasted growth rate of 2.7 % and Nepal, with projected GDP growth of 2.5 per cent, would be before Bangladesh in 2020. India would grow only by 1.9 %.
Pakistan would contract by 1.5 % and Sri Lanka by 0.50 %. The economies of Afghanistan and the Maldives will also contract.
In Southeast Asia, Vietnam, the Philippines and Indonesia are anticipated to remain positive, growing 2.7 %, 0.6 % and 0.5 % respectively. Thailand is expected to contract by 6.7 and Malaysia's growth sometimes appears to fall to minus 1.7 %.
"It is extremely likely that year the global economy will experience its worst recession because the Great Depression of the 1930s, surpassing that seen during the global financial crisis ten years ago," said IMF Chief Economist Gita Gopinath in the foreword to the report.
As a result of the pandemic, the global economy is projected to contract sharply by 3 % in 2020, much worse than through the 2008-09 financial meltdown, the WEO said.
It assumes that the pandemic will dissipate in the next half of 2020 and containment efforts can be gradually unwound, the global economy is projected to grow by 5.8 % in 2021 as financial activity normalises, helped by policy support.
A partial recovery is projected for 2021, with above-trend growth rates, however the level of GDP will remain below the pre-virus trend, with considerable uncertainty about the effectiveness of the rebound, Gopinath said.
Effective policies are vital to forestall worse outcomes, it said.
The immediate priority is to support the contagion, especially by increasing healthcare expenditures to strengthen the capacity and sources of the sector.
Policymakers will need to implement substantial targeted fiscal, monetary and financial market measures to support the affected households and businesses.
Strong multilateral cooperation is essential to overcome the effects of the pandemic, including help financially constrained countries facing twin health insurance and funding shocks and for channelling aid to countries with weak healthcare systems, the IMF said.
"This will hit hard Bangladesh's exports, remittances and foreign direct investment," said Zahid Hussain, a former lead economist of the WB's Dhaka office.
The recovery in 2021 are certain to get some accounting the help of the base aftereffect of low growth regarding Bangladesh and contraction in the event of the global economy.
The IMF seems to have made two rather heroic assumptions, according to the economist.
First, you will see no second or third wave of outbreaks in the next half of 2020. Second, the fiscal and monetary policy response globally, and presumably in Bangladesh, will succeed.
The experience of Japan, Singapore and, lately, China makes the assumption of Covid-19 fading and not coming back with another and third wave highly questionable.
Also, history provides no assurance that the policy response internationally will be well coordinated.
"Donald Trump's suspension of funding for the World Health Organisation yesterday makes this assumption a lot more questionable."
The potency of the policy response is also debatable in contexts where governance is a significant concern.
"Most of us hope and pray that the IMF is right in regards to a sharp recovery in 2021. In every fairness, the IMF does caution that there is extreme uncertainty about the outlook and serious risks of worse than projected outcomes," he added.
