ADB cuts Bangladesh's growth forecast to 5.1% due to political unrest

The ADB has lowered its forecast for Bangladesh's economic growth to 5.1 per cent primarily due to supply disruptions caused by political unrest in July and August, a media report said on Wednesday.

The Asian Development Bank (ADB) had earlier projected that the overall production of goods and services in the South Asian country would grow by 6.6 per cent for the fiscal year (FY) 2024-25, The Daily Star newspaper reported.

The Manila-based multilateral lender said it lowered the country's GDP growth projection for the current fiscal due to violent protests and recent floods.

The ADB said the fiscal and monetary policies are expected to remain tight, further dampening consumption and investment demand.

 

The lender said the forecast is highly uncertain as significant downside risks cloud the macroeconomic outlook.

"These risks primarily stem from ongoing political instability, a fragile law-and-order situation, and vulnerabilities within the financial sector," it said.

The ADB's latest forecast is below the World Bank's June projection, which estimated Bangladesh's economic growth at 5.7 per cent for FY 2025.

The ADB observed that demand remained suppressed by elevated inflation, tight global monetary conditions, and other macroeconomic challenges.

"Inflation has remained high due to elevated commodity and energy prices and currency depreciation. The current account deficit narrowed as both exports and imports declined," the ADB said.

The organisation further predicted that inflation could rise to double digits.

"Restoring and maintaining macroeconomic stability will depend on accelerated reforms to increase revenue for a better fiscal balance, stabilise the financial sector through improved interest and exchange rate policies, and diversify the economy," the ADB added.

Nobel laureate Muhammad Yunus took oath as the head of the interim government on August 8 after widespread student protests forced Prime Minister Sheikh Hasina to resign and flee to India.

Yunus, 84, recently announced the formation of six commissions to reform the judiciary, election system, administration, police, anti-corruption commission and the constitution.