Published in The Business Standard on Thursday 16 April 2020
IMF also sees growth crashing this year, but big jump next year
IMF prepared the report based on the assumption that the pandemic will fade in the second half of the current year
After slumping to only 2 percent growth this year, Bangladesh’s economy will see a big jump next year with a record growth of 9.5 percent, provided the pandemic fades in the second half of this year and economic activities return to normal.
The International Monetary Fund (IMF) made the projection in a report on Wednesday.
Bangladesh achieved 8.15 percent growth in the last fiscal year, and the budgetary projection of the current fiscal year is 8.2 percent.
However, the IMF had projected 7.4 percent growth for Bangladesh for the current year, in a report published in October last year.
The World Bank, in a report on Sunday, projected 2 to 3 percent of growth for Bangladesh in the current fiscal year. It said Bangladesh’s economy will grow 1.2 to 2.9 percent in the next fiscal year and 2.8 to 3.9 percent in the 2021-22 fiscal year. It added that Bangladesh will face a longer recession.
However, the IMF projected rapid recovery for the economy. It prepared the report based on the assumption that the pandemic will fade in the second half of the current year, and the disruptions will remain concentrated mostly in the second quarter of 2020.
Almost all countries will make a gradual recovery after the pandemic, as it takes some time for production to ramp up after the shock, assumed the report.
The IMF report further said the countries experiencing severe epidemics are assumed to lose about 8 percent of working days, and other countries are also assumed to experience disruptions to economic activities related to containment measures and social distancing, which, on average, are assumed to entail a loss of about 5 percent of working days in 2020.
Economic activities and financial conditions are expected to ease in the second half of the year.
Global economy in recession
The IMF projected that the global economic output would drop by 3 percent in the current year, an outcome far worse than the 2009 global financial crisis. The growth forecast is marked down by 6.3 percentage points relative to the October projection.
Growth in the advanced economy group is projected to decline by 6.1 percent, 7.7 percent lower than the previous projection.
The United States, the largest destination for Bangladesh’s export products, will face 5.9 percent negative growth this year, while Germany, the second largest destination of Bangladesh’s garment products, will face 7 percent of decline in GDP.
Among other developed countries, France will lose 7.2 percent of the GDP, while Italy would loss 9.1 percent, Japan 5.2 percent, the United Kingdom 6.5 percent, and Spain 8 percent of the GDP.
The global economy will grow by 5.8 percent in the next year, 2.2 percent higher than the previous projection, said the report. Meanwhile, advanced economies will grow by 4.5 percent as the economy of the United States will grow by 4.5 percent in 2021.
Experts express skepticism
Despite a slower recovery projection by the World Bank, the IMF projected a rapid recovery for Bangladesh along with other countries of the world.
The IMF projected 9.5 percent growth for Bangladesh in the next year, the highest ever for the country.
Economists and experts have expressed confusion over the rapid recovery of the economy, and criticised the IMF’s projection by terming it a speculative forecast prepared with some unrealistic assumptions.
Dr Zahid Hussain, former Lead Economist of the World Bank’s Dhaka office, said, “I could not realise how the IMF assumed that the Covid-19 pandemic will fade by the second half of the year.
“Several countries, such as China and Japan, are facing the second wave of Covid-19 cases. Most of the countries across the globe are extending the period of shutdowns and lockdowns. Even now, there is no coordination among global leaders to tackle the covid-19 issue.”
He pointed out that there are no significant possibilities for normalised economic activities in the near future and the rapid recovery of economic growth following the bold assumption.
Dr Fahmida Khatun, executive director of the Centre for Policy Dialogue said, “The growth rate of a country may jump in a year following economic recession due to a reduction in the base of the GDP.
“But Bangladesh is going to achieve positive growth of GDP in the current fiscal year, which indicates that the country has no possibility of obtaining an extraordinary growth rate in the next fiscal year.”
She continued, “Governments all over the world are reducing expenditure. Export earnings and remittance are falling due to reduction in purchasing capacity. It will take more time to recover from these issues.”
Dr Ahsan H Mansur, executive director of the Policy Research Institute and Chairman of the Brac Bank said, “There are some speculations in the IMF’s projection. It is realistic to say that the growth of Bangladesh would fall drastically in the current fiscal year.
“Introduction of treatment of Covid-19 would help to recover the economy,” said Mansur, who had served as a senior IMF official.