Govt looks to regain economy’s pre-Covid momentum by the end of current fiscal

The government is hoping to return the country’s economy to its pre-COVID momentum in terms of growth by the end of the running 2023-24 fiscal.

The official narrative in a Finance Ministry document is that the economy was knocked off its growth trajectory from 2020-2022 due to the pandemic.

Before the world could recover, the Russia-Ukraine war broke out in February 2022, impeding a return to previous levels due to the continued volatility in the global political and economic canvas.

The IMF revised the growth projections and suggested more modest growth globally than what was previously anticipated, it notes.

“Bangladesh also braced for impacts on its economy. However, actual data shows that Bangladesh did impressively even during the height of the Covid-19 outbreak and is expected to return to pre-Covid growth trajectory by the end of FY 2023-24,” the document said.

If everything goes according to plan and ‘assumptions hold’, the document says that 8 percent GDP growth rate is expected to be achieved in FY 2025-26.

“Therefore, the deviation of the actual from the planned growth envisaged in the 8th FYP (Five Year Plan) remained small,” it said.

The document mentions that capital accumulation is key for development and hence the government aims to foster private investment along with public investment.

Total investment in FY 2021-22 stood at 32.0 percent of GDP in which the contribution of the private and the public sectors were 24.5 and 7.5 percent, respectively.

However, it mentions that to achieve the long and medium-term growth targets, the level of investment will need to be increased further.

The document points out that there is room to increase the implementation rate of public investment and hence if the pace of implementation of the development projects can be increased, the required level of investment can be attained.

“Recognising this, the government has taken steps to bring about some structural changes in both project design and implementation levels,” it said.

The official document said that Russia-Ukraine war has put global energy supplies at risk. Russia is a major global supplier of energy and hence when the war broke out, commodity prices spiked fast.

Bangladesh started to suffer from this like almost all other countries. By December 2022, point-to-point inflation rose to 8.7 percent and then further rose to 9.3 percent by March 2023.

However, global commodity prices are already falling, and the central banks have raised policy rates and because of this it is expected that inflation will come down in the coming months.

The IMF has also projected that the measures taken by the governments will help reduce inflation in the medium-term. The Finance Division (FD) has projected that average inflation in FY 2022-23 would be 7.5 percent and will reduce to 6.0 percent in FY 2023-24.

To cool down inflation and to protect the income of the poor, the government has emphasised increasing the domestic supply of essential items and at the same time gradually tightening monetary policy.

The document says that food inflation hurts the poor the most. Keeping this in mind, the government, through various measures, including subsidies and incentives, encouraged the growth of agricultural output.

To support production in the agriculture sector, the disbursement of credit has also been increased, it says.

By the end of February 2023, the disbursement of agricultural credit and non-farm rural credit amounted to Tk. 210.66 billion, which is 13.66 percent higher year on year.

Owing to supportive policies of the government, the general index of industrial production (medium and large-scale manufacturing) during July-December of FY 2022-23 increased by 8.47 percent (y-o-y) reflecting a slight expansion in industrial production, the document said.