IMF further cuts Bangladesh GDP growth forecast

The International Monetary Fund on Tuesday further lowered the projection of the growth of
Bangladesh’s gross domestic product because of spillover effect from European economic crisis.
The organisation in its twice-yearly World Economic Outlook released on Tuesday lowered the
projection of the GDP growth to 6.1 per cent for this fiscal year, from 6.3 per cent the lender had
estimated in September 2011.
The IMF projection is in line with the World Bank and the Asian Development Bank which also
projected that Bangladesh would not achieve a 7 per cent growth this fiscal year.
Although the government in the budget for the current fiscal year estimated a 7 per cent growth,
the WB projected that the GDP growth would be 6 per cent and the ADB 6.2 per cent, especially
because of economic crisis in Europe that has affected the country’s export in recent times.
With the latest projection for the GDP growth, the IMF lowered twice the estimate for
Bangladesh’s GDP growth since April 2011, when it had projected that the country’s economy
would grow by 6.6 per cent in 2011-2012 fiscal year.
Finance minister AMA Muhith, however, in the past week said that the country’s GDP growth
would be near to 7 per cent and that the policymakers understood better the economy of the
country than the lenders.
The international lender also lowered the projection for the country’s GDP at 5.90 per cent for
2012 from 6.10 per cent it estimated earlier.
In the outlook, IMF said that activity across Asia slowed during the last quarter of 2011, reflecting
both external and domestic developments.
‘The effect of spillovers from Europe can be seen in the weakness of Asia’s exports to that
region,’ it said.
‘A sharp rise in global risk aversion and uncertainty would also produce significant spillovers, not
only through its effect on financial market conditions, but also because of its dampening effect on
trade in durables.’
The IMF, however, hiked its global growth forecasts but warned the outlook was ‘very fragile’ and
could be shattered by Europe’s debt crisis and high oil prices.
The IMF estimated global growth at an annual rate of 3.5 per cent this year, accelerating to 4.1
per cent in 2013.
The forecasts reflected an upgrade from the January forecast of 3.3 per cent and 4.0 per cent,
respectively.
However, ‘if disruptions in the euro area worsen, access to funding is very likely to tighten
everywhere,’ the IMF warned.
Rising oil prices could also wreak havoc, particularly if geopolitical tensions over Iran’s disputed
nuclear programme cut global supply.
A halt of Iran’s exports to the OECD advanced economies, if not offset by other supplies, could
push prices up about 20 to 30 per cent, sending the global economy into a 1930s-magnitude
slump, the IMF projected.