Bangladesh may suffer a significant economic setback if the Russia-Ukraine war lingers and propagates in other countries, said a Bangladesh Bank quarterly report released on Monday.

The central bank, however, does not think that the existing pattern of war would put any major impact on the country’s economic growth, said the report.

On February 24, 2022, Russia started military attacks in Ukraine amid the latter’s move to join the North Atlantic Treaty Organisation.

Instead of seeing any major effect of the present nature of war, the central bank, based on the existing economic and global situation, forecasted that the growth momentum was expected to be stronger in the rest of the current fiscal year, hinging upon growth supportive fiscal and monetary measures, growing external and internal demand, improving Covid situation and rising business confidence.

The government has targeted to achieve 7.2 per cent gross domestic product growth in the fiscal year 2021-2022.

In FY21, the growth was 6.94 per cent after posting a 29-year low of 3.51 per cent growth rate in FY20.

The projected growth for the current fiscal year, however, may face headwinds from many factors, including unfavourable outcomes of the Russia-Ukraine war and elevated global commodity prices, the BB said.

‘Given Bangladesh’s relatively smaller trade linkage with Russia and Ukraine, the direct adverse impact of the war on Bangladesh is expected to be modest,’ the BB report said.

‘However, if the conflict lingers and propagates in other countries, the damaging effects of the war on Bangladesh might be nontrivial,’ the central bank said.

‘Moreover, the sharpening of global energy and non-energy commodity price spikes caused by the Russia-Ukraine war may translate into domestic prices and create an unfavourable position in the balance of payments in the coming months,’ the BB said.

The central bank said, ‘A coordinated fiscal-monetary policy action is needed to anchor inflation expectation and continue the growth momentum in the near and medium term.’

As per the official data, the country’s inflation as measured by the consumer price index on point-to-point basis surged to 6.71 per cent in February 2022 from 5.86 per cent in January.

The 12-month average inflation reached 5.69 per cent in February from 5.62 per cent in January.

On the other hand, the country’s trade deficit reached $18.7 billion in the first seven months of FY22 against $10.27 billion in the same period of the previous fiscal year.

As a result, the country’s foreign exchange reserve fell by more than $4 billion in a span of seven months.