After being severely affected by the covid-19 pandemic—which slowed growth and for the first time in two decades reversed the poverty reduction trend—the economy is recovering gradually.
Over the first half of FY21, factories reopened and exports rebounded. However, the economy faces elevated risks in the context of the ongoing covid-19 pandemic.
In Dhaka and Chittagong, the country’s two largest cities, recent surveys pointed to a recovery in the labor market in the first half of FY21. With gradual restoration of livelihoods, food security in poor and slum areas improved. In Chittagong, the percentage of adults working had returned to pre-covid-19 levels by February 2021.
"Despite the uncertainty created by covid-19, the outlook for Bangladesh’s economy is positive. Much of the pace of recovery will depend on how fast mass vaccination can be achieved,” said Mercy Miyang Tembon, World Bank Country Director for Bangladesh and Bhutan, in a press release on Monday.
"The World Bank will support a resilient recovery, helping Bangladesh achieve green, smart, and inclusive growth," Tembon stated.
In FY21, growth will be supported by a recovery in manufacturing as export demand strengthens, a rebound in construction supported by accelerating public investment, and robust service sector growth as the vaccination campaign progress. inflation is projected to remain close to Bangladesh Bank’s 5.5 percent target, and the fiscal deficit is projected to remain at 6 percent of GDP.
Risks to the outlook remain elevated. A fragile global economic recovery could dampen demand for RMG products and limit job opportunities for migrant workers. The COVID-19 pandemic has exacerbated financial sector risks stemming from nonperforming loans and weaknesses in bank governance and risk management.
Improving logistics performance could help accelerate the recovery and improve competitiveness. The report outlines opportunities to modernize the logistics system to ensure business continuity and build resilience. This can be achieved through a system-wide strategy to increase logistics efficiency; improve the quality, capacity, and management of infrastructure; improve the quality and integration of logistics services; and, achieve a seamless integration of regional logistics services.