Bangladesh Economic Outlook
The economy appears to have weakened so far in FY 2023 (July 2022–June 2023). The chief culprit has been weakness in the global economy; merchandise exports expanded 10% in July–January compared to 34% in FY 2022. That said, in the same period, remittances remained relatively robust, rising 4% year on year (FY 2022: minus 15%), largely due to the global reopening from Covid-19. Meanwhile, higher energy prices have further hurt economic growth, with a hike in fuel prices in August likely denting private consumption. In addition, the weakness in the external sector has hit international reserves. This led the government to secure a financing agreement from the IMF in November, with final approval from the Fund’s board granted on 30 January for a USD 4.7 billion loan. This development means that Bangladesh, unlike its neighbors Pakistan and Sri Lanka, is highly unlikely to suffer a balance of payments crisis for the foreseeable future.
Inflation eased to 8.6% in January from 8.7% in December. Inflation is seen cooling further in 2023 as commodity prices and domestic demand ease. That said, it will likely linger at elevated levels, stoked by a weaker taka. On 15 January, the Central Bank raised its key policy rate by 25 basis points to 6.00% to contain inflation.