Economy
Inflation in Developing Asia to Approach Pre-Pandemic Levels as Fuel and Food Prices Decline
Asian Development Bank (ADB) reports that the higher estimate of 6% for fiscal 2022-2023 reflects a robust performance in net exports, with imports declining more than anticipated and export growth remaining relatively stable. The manufacturing sector, supported by favorable government policies, played a significant role in driving growth across businesses of all sizes. Although crop losses due to natural disasters persisted, they were partially mitigated through subsidies, incentives, and other measures. The service sector experienced positive growth, primarily attributed to increased activities in warehousing, support services, healthcare, and social services. On the demand side, both public consumption and investment surpassed expectations, contributing to overall economic expansion. ADB maintains a growth forecast of 6.5% for fiscal year 2024, unchanged from the previous estimate.
ADB also maintains its growth projection for developing economies in Asia and the Pacific at 4.8% this year, emphasizing the continued support from robust domestic demand. The region’s inflation is expected to decline further, approaching pre-pandemic levels, as fuel and food prices decrease, according to the Asian Development Outlook (ADO) report released in July 2023. Inflation for developing Asia is anticipated to be 3.6% this year, lower than the April forecast of 4.2%. However, the inflation outlook for 2024 has been revised slightly upward to 3.4% from the previous estimate of 3.3%.
The reopening of the People’s Republic of China (PRC) is playing a significant role in bolstering the region’s growth. The PRC’s economy is projected to grow by 5.0% this year, reflecting unchanged figures from the April forecast, primarily due to strong domestic demand in the services sector. However, the demand for Asia’s exports, particularly electronics and manufactured goods, is slowing down as major advanced economies implement monetary tightening measures, impacting overall economic activity. Consequently, the growth forecast for the region in the following year has been marginally revised downward to 4.7% from the previous estimate of 4.8% in April.
ADB Chief Economist Albert Park acknowledges the steady pace of recovery in Asia and the Pacific from the pandemic. He highlights the driving forces of growth, including domestic demand, robust services activity, and the resurgence of tourism in many economies. However, challenges remain in terms of weak industrial activity and exports. Additionally, the outlook for global growth and demand in the coming year has worsened.
During the eleventh month of the current fiscal year, the country’s foreign currency reserves have fallen below $19 billion for the first time. After paying off some import bills, the reserves have now stood at $18.26 billion on Sunday.
According to the International Monetary Fund (IMF), as of May 8, the total foreign currency reserves of the country were $19.82 billion.
Mohammad Mezbauul Haque, the spokesperson of Bangladesh Bank, informed that through the Asian Clearing Union (ACU), the central bank has paid off import bills totaling $1.63 billion over the past two months.
However, Bangladesh Bank maintains that after paying off the import bills, the foreign currency reserves now stand at $23.71 billion.
According to the Central Bank’s accounts, the reserves were $25.27 billion on May 8.
The Dhaka Stock Exchange (DSE) and the DSE Brokers Association (DBA) have expressed gratitude towards Prime Minister Sheikh Hasina for her directive to list government companies in the capital market, a move hailed as timely and positive.
The directive was issued during the recent meeting of the Executive Committee of the National Economic Council (Ecnec) last Thursday.
Dr. Hafiz Muhammad Hasan Babu, Chairman of DSE, described the directive as a significant step towards enhancing the dynamics of the capital market. He emphasized that besides invigorating the capital market, this move would also attract foreign investment and promote sustainable development.
Despite previous efforts, government institutions had not been listed in the stock exchange, according to a notification issued by the DSE. The Prime Minister’s directive is seen as a pivotal step towards revitalizing and expanding the economy.
Dr. Babu further remarked, “The listing of reputable companies in the capital market, as directed by the Prime Minister, will greatly benefit the country’s economy. It will also enhance investor confidence.”
Similarly, the DBA released a notification applauding the Prime Minister’s directive, terming it as positive and timely for the capital market.
Saiful Islam, President of DBA, expressed optimism about the directive’s potential to accelerate the country’s capital market and overall economy. He pledged support to relevant government departments and regulatory bodies in implementing the directive, ensuring its positive impact on the economy, including the capital market.
India has expressed interest in financing Bangladesh’s Teesta project, announced Foreign Minister Hasan Mahmud. Speaking to reporters after a meeting with Indian Foreign Secretary Vinay Mohan Kwatra, Mahmud stressed the importance of aligning the project with Bangladesh’s needs. He confirmed discussions on the Teesta issue during the meeting. Mahmud also affirmed Prime Minister Sheikh Hasina’s upcoming visit to New Delhi, indicating that the finalization of the date would depend on the formation of the new Indian government following ongoing elections.
Meanwhile, the IMF has approved a $1.15 billion staff-level loan for Bangladesh in its third tranche. Mahmud noted the ongoing elections in India and the subsequent formation of the new government as factors influencing the scheduling of PM Hasina’s visit.
When asked about the sequence of visits to India and China, Mahmud suggested Delhi’s geographical proximity to Bangladesh. Diplomatic sources suggest PM Hasina’s visit to India is planned for early July, following India’s elections.
Pre-election surveys indicate strong prospects for Indian Prime Minister Narendra Modi’s re-election. Modi previously congratulated PM Hasina on her electoral victory in January, expressing optimism about strengthening ties between the two nations.
The last bilateral engagement between the prime ministers occurred during the G-20 Leaders Summit in September 2023. Modi is expected to invite South Asian and BIMSTEC leaders to his swearing-in ceremony, fostering regional cooperation.
Addressing border killings, Mahmud emphasized the government’s commitment to ending such incidents and promoting the use of non-lethal weapons by border forces. Discussions also covered enhancing physical and people-to-people connectivity, including cooperation with India to import hydropower from Nepal and Bhutan through India. Mahmud highlighted the need to further ease visa restrictions to strengthen people-to-people relations.
