BD economic indicators may see upturn: IMF

Election-engendered worries easing with the vote evidently passing through opposition, the IMF now expects some of Bangladesh's economic indicators to begin showing positive signs attuned with a global rebound.

"Now the election is behind, the uncertainty has dissipated, we expect the financial account will get back into more resilient one," says Krishna Srinivasan, Director for Asia and Pacific Department of the International Monetary Fund (IMF), at a press conference in Tokyo on the Regional Economic Outlook.

Replying to a virtually placed question as to whether Bangladesh was on track as regards IMF's string-attached lending package, he answered in the affirmative.

"Broadly speaking, yes," Mr Srinivasan said, in reference to an IMF team's review on Bangladesh's programme of action two months back.

"The review was satisfactory in terms of the meeting of various, what we call, conditionality in the programme," he said, adding that there were some areas where the country couldn't meet the requirements, particularly on the external side, and that's partly because of the run-up to the election.

On the macroeconomic front, he said the financial account was in the negative territory while current account was doing reasonably well because of surging exports and import compression.

Replying to another query whether issuing bonds to foot subsidy bills to fertiliser and power companies was a right move, he said the country team working in Bangladesh will be assessing the matter in the months forward which will provide more definitive answer.

However, he said, "It could be important to see what the choices you have."

The regional executive of the Washington-based global agency said the government as part of IMF support programme is embarking on significant fiscal tightening to ensure that the revenue mobilisation remains robust, expenditures are more targeted.

So, also fiscal consolidation in that context can be an option. "But the question is how much consolidation it can do. And in that context the countries have to go beyond what they have been doing in terms of fiscal consolidation. And further tightening may be needed," he said about the to-do tasks.

On world economy, he said global growth has proven surprisingly resilient, and inflation continues to decline steadily. Stronger private and government spending upheld demand in 2023, despite tight monetary conditions.

On the supply side, higher labour force participation, the unwinding of supply-chain bottlenecks, and lower energy prices all supported activity, he noted on positive economic turnaround globally.

"For the world economy, we now project 3.1-percent growth for 2024-the same growth rate as in 2023. For 2025, we anticipate a modest increase to 3.2 per cent."

Global inflation is projected to fall from 6.8 per cent in 2023 to 5.8 per cent this year and to 4.4 per cent in 2025. "Core inflation is also on a downward trend."

And for Asia, the IMF director said, "The good news is that we have revised growth upward for both 2023 and 2024."

For 2023, the new estimated growth is at 4.7 per cent, compared to 4.6 per cent projection in October. "China and India account for most of the upward revision."

Mr Srinivasan points out three reasons behind upgradation of regional growth forecast for 2024 to 4.5 per cent, from 4.2 per cent last October.

Firstly, part of the positive dynamic from last year carries over into 2024.

Secondly, a more supportive external environment, notably robust growth in the United States, reinforces domestic resilience. Demand for technology-computers, electronics, and optical products-has picked up in recent months, which benefits economies such as Korea and Singapore.

And coming third is the fact that countries like China and Thailand have announced sizeable policy stimulus.

Overall, Asia is on-track to deliver again two-thirds to global growth in 2024, as it did in 2023.

However, he says as a footnote, even though the outlook has improved, important risks also remain.

A larger and more drawn-out correction in China's property sector could curtail domestic demand further, especially if accompanied by stress in local-government finances. It would also reduce demand for the region's exports.

Moreover, the financial conditions are still volatile. Tighter-than-expected conditions in the United States or Asia could put pressure on heavily indebted industries and economies.

And, rising risks of geopolitical fragmentation are particularly onerous for Asia, given the region's deep integration into global trade. "We already see evidence of negative effects in the form of longer and less-efficient supply chains. The threat of higher shipping costs reinforces risks to trade."

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