## Building Economic Progress in Bangladesh

_IMF News, February 28, 2017_

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**Canonical URL:** [Building Economic Progress in Bangladesh](https://www.imf.org/en/news/articles/2017/02/28/sp02272017-building-economic-progress-in-bangladesh)

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## Bibliographic details
- Authors: Misuhiro Furusawa
- Published: February 28, 2017

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### Global Outlook
- IMF World Economic Outlook update (January) projected global growth in 2016 of 3.1 percent — the weakest growth rate since 2009.
- Central projection: global growth will rise to 3.4 percent in 2017, and 3.6 percent in 2018.
- Drivers and regional notes:
  - Activity rebounded in the United States after a weak first half of 2016.
  - Output remained below potential in a number of other advanced economies, especially the euro area.
  - Emerging market and developing economies showed signs of rebound after a weak 2015; China’s growth was a bit stronger than expected.
  - Growth is projected to remain strongest in emerging and developing Asia.
- Key risks noted that could prompt forecast adjustments:
  - Uncertainty about the policies of the new U.S. administration.
  - Potential slowdown in China driven by rapid credit expansion, government support for inefficient state-owned companies, and overall accumulation of corporate debts.

### Risks to the Outlook
- Political risks:
  - Rising discontent with globalization in advanced economies could lead to increased protectionism, affecting productivity, incomes, market sentiments, and economic growth.
- Geopolitical and security risks:
  - Increased geopolitical tensions and terrorism affecting outlooks, especially in the Middle East.
  - Increasing refugee flows with clear implications for many countries.
- Advanced-economy risks:
  - Extended shortfall in private demand and inadequate progress on reforms could lead to permanently lower growth and lower inflation, with negative implications for debt dynamics.
- Emerging-market risks:
  - High corporate debt, declining profitability, weak bank balance sheets, and thin policy buffers could increase exposure if global financial conditions tighten.
- Low-income economy risks:
  - Continued effects of low commodity prices; some countries have pursued expansionary policies that eroded fiscal reserves and remain vulnerable to external shocks.

### The Challenges Facing Asia
- Short-term:
  - Near-term outlook remains strong and stable; accommodative policies and easing financial conditions should underpin domestic demand and help offset weak export growth.
  - China expected to remain a major driver of growth in 2017; projections revised upward for Japan.
  - Forecast for India in the current and next fiscal years has been trimmed, primarily due to the temporary impact of the recent currency note initiative.
  - Growth revised downward in Indonesia and Thailand.
- Longer-term structural challenges:
  - Need for economic reforms to rebalance supply and demand, reduce vulnerabilities, increase economic efficiency and potential growth.
  - Need to foster more inclusive growth and address rising income inequality in most of Asia.
  - Need to rebalance growth toward domestic demand as demand from advanced economies grows more slowly.
  - Challenge of climate change and natural disasters, requiring measures from mitigation infrastructure investment to carbon taxes.

### Bangladesh’s Transformation
- Structural achievements:
  - Rapid expansion of the garment industry has helped reduce poverty and raise employment of women.
  - Sustained increase in per capita income; progress toward middle-income status.
  - Poverty has been nearly halved since 1990.
  - Inequality remains low and stable.
  - Strong development indicators for a low-income country: life expectancy, child mortality, and access to water and sanitation highlighted.
  - Good progress on financial inclusion; Bangladesh compares very favorably with other developing countries across a broad range of FI indicators.
- Macroeconomic outcomes:
  - IMF-supported Extended Credit Facility Arrangement was successfully completed in October 2015.
  - Post-program outcomes: higher reserves, lower public debt as a share of GDP, and lower underlying inflation.
- Remaining challenges and priorities:
  - Need to increase private investment to sustain high levels of growth.
  - Need for a significant increase in public investment to maintain competitiveness and generate further productivity growth.
  - Capital market development to channel savings toward long-term investments.
  - Raise revenues and lift foreign direct investment; implement the VAT law.
  - Remove red tape and simplify the trade regime.
  - Structural reforms, strengthened institutions, and capacity development—priorities include improving tax system efficiency, fiscal management, and the business environment.
  - Sustaining medium-term growth requires a stable security situation to maintain market confidence.
- Ongoing engagement:
  - An IMF team was in Dhaka for the Article IV consultation to assess developments and discuss policies.

### The IMF and Bangladesh
- IMF roles and instruments:
  - Provides analysis and policy advice for countries and on regional and global trends.
  - Offers financial assistance through lending programs aimed at supporting effective policies and structural reforms, including concessional loans to developing countries (as with Bangladesh’s Extended Credit Facility).
  - Provides technical assistance and training—an important part of the IMF’s operational budget—to strengthen government capacity to design and implement effective policies.
- Bangladesh-specific support:
  - Bangladesh is one of the largest recipients of IMF technical assistance, focused on public financial management, tax policy and administration, banking supervision, and statistics.
  - Bangladesh is a member of the South Asia Regional Training and Technical Assistance Center in New Delhi (opened earlier this month) — a collaboration among the IMF, six member countries (Bhutan, India, the Maldives, Nepal, Sri Lanka, and Bangladesh), and development partners to meet regional technical assistance and training demand.
  - Encouragement to use the center to strengthen institutional and human capacity for policy design and implementation.
- IMF presence and commitment:
  - Resident Representative Stella Kaendera is based in Dhaka and in daily contact with government officials.
  - IMF will continue to provide assistance, analysis, and advice to support Bangladesh’s objectives of growth and poverty reduction.

*Speech by Mitsuhiro Furusawa, IMF Deputy Managing Director, Dhaka University, Bangladesh, February 28, 2017.*

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## References

- [Mitsuhiro Furusawa](http://www.imf.org/external/np/omd/bios/mf.htm)
- [People's Republic of China and the IMF](http://www.imf.org/external/country/CHN/index.htm)
- [Bangladesh and the IMF](http://www.imf.org/external/country/BGD/index.htm)
- [Technical Assistance -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-capacity-development)
- [Speeches](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2017/02/28/sp02272017-building-economic-progress-in-bangladesh_