DOT Desk: Bangladesh’s economy is set to continue to expand at a fast pace in the near term, above 7 per cent per year, says a new UN report launched, reports The Daily Sun.
Strong fixed investment, vigorous private consumption and accommodative monetary policy will lead the growth, according to the World Economic Situation and Prospects (WESP) 2019 report. Apart from Bangladesh, the economic condition of India and Bhutan in South Asia has also been mentioned as ‘largely positive’ with Indian economic expected to expand by 7.6 and 7.4 per cent in 2019 and 2020. In contrast, the outlook in other economies, such as Iran and Pakistan, has visibly deteriorated. The Iranian economy is estimated to have entered into recession in 2018, which is projected to deepen throughout 2019.The report has termed South Asia and East Asia most dynamic regions despite their facing some challenges.Supported by large Indian economy, overall south Asian economic outlook is moderately favourable compared to other developing regions, with GDP growth projected at 5.4 per cent in 2019 and 5.9 per cent in 2020, the report says. Growth is expected to be supported by private consumption and, in some cases, investment demand, even as monetary policy stances have been tightened in some economies.
But beyond these aggregate trends, the outlook is highly divergent across south Asian countries, the report added.
The global economy will continue to grow at a steady pace of around 3 per cent in 2019 and 2020 amid signs that global growth has peaked, the report said.
However, a worrisome combination of development challenges could further undermine growth, it also warned.
Growth in East Asia is projected to moderate from 5.8 per cent in 2018, to 5.6 per cent in 2019 and 5.5 per cent in 2020.
In China, growth is projected to remain solid but will moderate from 6.6 per cent in 2018 to 6.3 per cent in 2019.
Other large East Asian economies including Indonesia, Korea, Malaysia, the Philippines and Thailand, growth is projected to remain robust given resilient domestic demand.
Mentioning that most South Asian nations have depreciating exchange problem, the report observed that the fiscal deficit in Bangladesh is at a record high, close to 5.0 per cent of GDP, as the country struggles to expand the tax base.
In addition, given that South Asia is a net oil importer, a significant rise in oil prices could raise inflationary pressures and constrain economic activity in several economies.
Beyond the short-term outlook, South Asia—which accounts for 25 per cent of the world population but only for 5 per cent of the world GDP—also needs to tackle medium-term challenges and structural constraints to unleash its enormous growth potential, it warned.
The world economy is faced with a confluence of risks with the potential to severely disrupt economic activity and inflict significant damage on longer-term development prospects.
These risks include waning support for multilateral approaches; the escalation of trade policy disputes; financial instabilities linked to elevated levels of debt; and rising climate risks, as the world experiences an increasing number of extreme weather events.
UN Secretary-General António Guterres cautioned, “While global economic indicators remain largely favourable, they do not tell the whole story.”
He said the report raises concerns over the sustainability of global economic growth in the face of rising financial, social and environmental challenges.
For East and South Asia, an abrupt tightening of global financial conditions poses a risk to financial stability and growth.
In East Asia, a further intensification of trade frictions between China and the United States will have adverse spillovers on regional growth through trade, investment, and financial channels.
In China, the recent loosening of monetary policy may contribute to a further increase in domestic debt, raising the risk of a disorderly deleveraging process in the future.
In South Asia, setbacks in the implementation of reforms, political uncertainties and, in some countries, security problems, can affect investment prospects, according to the report.