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WB sees major dip in GDP growth

Projects 4.5pcfor Bangladesh in current fiscal year amid global meltdown

Staff Correspondent
The World Bank has said the GDP growth in Bangladesh in the current fiscal year will be 4.5 percent, which is much lower than what the government and other donors projected.
The growth will further drop to 4 percent next fiscal year, according to the World Bank's Global Economic Prospect (GEP) 2009 released Tuesday.
In November last year, the WB forecast Bangladesh's GDP growth at 5.7 percent this fiscal year and 6.2 percent next.
However, both Bangladesh Bank and Bangladesh Bureau of Statistics project the GDP growth in the current fiscal at 6 percent.
The Asian Development Bank in its outlook published Tuesday has projected the growth at 5.6 percent for this year and said it will come down to 5.2 percent next year.
Talking to The Daily Star Senior Economist Zahid Hossain of World Bank Dhaka Office yesterday said, "The central message here is that economic uncertainties have deepened with a perceived increase in downside risks. This increase in uncertainties makes it very difficult to project a point estimate of growth for FY09.
"We think growth in Bangladesh in FY09 could range between 4.5 and 5.5 percent, depending on the extent of the impact of global economic crisis on exports and remittance in the last quarter of the current fiscal year. Our GEP colleagues choose to present 4.5 percent growth for Bangladesh in order to highlight the downside risk,"he said.
"I should emphasise that even this, what you may consider conservative growth forecast, is the second highest in the developing world- -only China has a higher growth forecast--and the highest in South Asia. The forecast for India is 4 percent and Pakistan just 1 percent," he added.
Zahid Hossain also said the new GEP update projects a gloomier external outlook than what the WB assessed last November. "Global growth forecasts in this update have been revised downwards very significantly. Global GDP is projected to contract by 1.7 percent in 2009 instead of 0.9 percent global growth projected for 2009 in November. Growth in OEC economies--Bangladesh's main export markets--is projected to contract 3 percent instead of 0.3 percent contraction projected for 2009 earlier in November."
Zahid Hossain said, "World trade volume growth has also been revised downwards substantially. It is now projected to decline by 6.1 percent in 2009, a significantly sharper contraction in trade volumes of manufactured products (Bangladesh's main exports). In November, drop in world trade volume in 2009 was projected at 2.1 percent.
The GEP said South Asia has been marked down to 3.7 percent growth for 2009 from 5.4 percent anticipated ear-lier--and down from 5.6 percent registered in 2008.
GEP said, "Though terms of trade has moved in favour of the region, with the fall in oil price weakening demand in export markets is being felt sharply as is a tempering of services exports from India's high tech centres, as capital spending wanes globally. Remittance is anticipated to ease as conditions in host countries falter, albeit with some lag. Capital inflows have diminished contributing to falloff in investment growth, notably in India. Fiscal support for slowing economies may face constraints in already quite high budget deficits.
"World Bank analysis shows that poor people are feeling the impact of the crisis across the world, many of whom were already hit hard by the food and fuel crises. The pace of poverty reduction has slowed with about 65 million people estimated to remain under the $2 a day poverty line in 2009 as a result of the crisis."
Justin Yifu Lin, WB chief economist and senior vice-president of Development Economics, said, "Conditions of recession are affecting the world's poorest people, making them more vulnerable than ever to sudden shocks--but also reducing the opportunities available to them, and frustrating their hopes. This could reverse years of progress and is nothing less than an emergency for development."