The latest IMF report on the health and stability of the Bangladeshi economy is, on the whole, quite positive.
The IMF analysts claim that with respect to Bangladesh’s economy “financial contagion was contained by low levels of financial integration. Growth, estimated at 5.9 percent for FY09, decelerated only modestly from the pace recorded in recent years and remained broad-based. Monetary conditions were increasingly loosened through the summer. However, unlike in some neighboring countries (e.g. India), no fiscal stimulus measures were put in place, apart from a modest budget reallocation aimed at supporting sectors affected by the global downturn. The limited impact of the global downturn on Bangladesh’s growth partly reflects the relatively low overall trade openness, and the large share of basic textiles and garments in total exports, which fared relatively well (Box 1). The resilience of Bangladesh’s exports contrasts with the experience in other countries in Asia where exports are still substantially below the pre- crisis peak.
Strong exports, steady remittances and weak imports pushed Bangladesh current accounts to a surplus–about 3% of GDP in FY 2009. This caused international reserves to rise sharply and put downward pressure on interest rates. Declining international food and commodity prices, lowered inflation.
Going forward, the IMF report good medium term growth. “As global growth and trade recover, Bangladesh’s growth should edge up as well, to around 6 percent per annum (Text Table 1), building on increasing trade integration with countries in the region and the rest of the world, and growth momentum in the agriculture, services, and construction sectors. The current account can be expected to remain in surplus with the import coverage of reserves remaining robust. “
This is all to the good. The only stumbling block to this assessment and to short term projections are that if the global economy flounders, falling imports is going to put pressure on economic growth. Moreover as international food prices stabilizes, inflation is likely to increase.
The projections are optimistic. The trends are healthy. This looks to me like a promising interim run.
