Experts predict trouble for Bangladesh
Sunday, 19 October 2008
FE Report
The country's export earnings and inflow of remittances might face setback if the ongoing global financial crisis persists and the economies of USA and Europe are troubled by recession, economists, bankers and experts told a seminar in Dhaka Saturday.
Besides, they said, there could also be a decline in the aid flow which is very important for poverty reduction and development programmes for Bangladesh.
The Citibank NA Bangladesh organized seminar on 'Global Financial Crisis and Bangladesh' at the Citi Learning center.
The US-based Citibank sees that the crisis might lead to a prolonged recession in the USA and an economic slowdown in Europe.
"As an exporter to European and US consumer markets, Bangladesh economy might go through a period of economic sluggishness," the Citibank said in a report titled, 'Global Financial Crisis & Bangladesh', presented by Sajedul Islam, country Treasure & Head of Fixed Income, Currencies & Commodities of the bank.
"So far the impact on Bangladesh has been minimal, but we need to constantly evaluate effect on Bangladesh as global financial events unfold," the report said.
Regarding the country's banking sector, the report said commercial banks of Bangladesh have around US700 million of deposits placed in banks outside the country.
However, a large part of this deposit is with foreign banks, which are not facing any liquidity crisis at the moment, Mr. Islam said, adding that probability of near term financial impact on Bangladesh economy seems to be very remote.
World Bank Senior Economist Zahid Hussain said the foreign assistance for Bangladesh will not be affected this year despite the global financial crisis.
"But it might face an adverse impact if the international financial crisis continues for long," Mr. Hussain said, adding that the prices of Bangladeshi export items may decline in the global market because of the recession.
In 2002, the prices of Bangladesh exports dropped at least 15 per cent due to economic recession in the United States, he added.
Mr. Hussain, however, ruled out any immediate adverse impact of the global financial crisis on the flow of inward remittances.
"The inflow of remittances may be affected as medium and long term effects of the global financial crisis," the World Bank economist said, adding that the flow of inward remittances will depend on oil prices and construction sector performance in the Middle Eastern countries.
Managing Director and Country Officer of the Citibank NA Mamun Rashid presided over the seminar while President of the Bangladesh Enterprise Institute Farooq Sobhan, Chief Executive Officer of the Foreign Trade Institute MA Taslim, Chairman of the Association of Bankers, Bangladesh (ABB) K Mahmood Sattar and Ambassador Masud Aziz spoke on the occasion as panel discussants.
Mentioning about massive depreciation of Pakistani and Indian Rupees against the US dollar the Citibank country chief stressed on the introduction of a competitive exchange rate to ensure competitiveness of local export in the global market.
"The regulators and other stakeholders do need to look at the issue of competitiveness also," Mr. Mamun said, adding that the future of Bangladesh lies in its emergence as a trading nation.
"What we need are better election, better government and better accountability of the bureaucracy," he said.
Former foreign secretary Farooq Sobhan said the US economic performance is important for Bangladesh, particularly in relation to RMG exports. The performance of the European economy is also important for the country, he added.
About exchange rate, he also said India and Pakistan have already changed their exchange rates against the US dollar aiming to make their export competitive in the global market.
"Indian and Pakistani exports have become more competitive than that of Bangladesh in the international market," the former foreign secretary said.
MA Taslim said the ongoing financial crisis has both positive and negative impact on the country's economy. One positive gain is that the prices of all commodities, including edible oil, have already declined in the global market, he added.
"Prices of most commodities are declining in the global market. Certainly we would gain out of it," Mr. Taslim said, adding that the declining commodity prices would reduce the country's import costs.
The country's export earnings and inflow of remittances might face setback if the ongoing global financial crisis persists and the economies of USA and Europe are troubled by recession, economists, bankers and experts told a seminar in Dhaka Saturday.
Besides, they said, there could also be a decline in the aid flow which is very important for poverty reduction and development programmes for Bangladesh.
The Citibank NA Bangladesh organized seminar on 'Global Financial Crisis and Bangladesh' at the Citi Learning center.
The US-based Citibank sees that the crisis might lead to a prolonged recession in the USA and an economic slowdown in Europe.
"As an exporter to European and US consumer markets, Bangladesh economy might go through a period of economic sluggishness," the Citibank said in a report titled, 'Global Financial Crisis & Bangladesh', presented by Sajedul Islam, country Treasure & Head of Fixed Income, Currencies & Commodities of the bank.
"So far the impact on Bangladesh has been minimal, but we need to constantly evaluate effect on Bangladesh as global financial events unfold," the report said.
Regarding the country's banking sector, the report said commercial banks of Bangladesh have around US700 million of deposits placed in banks outside the country.
However, a large part of this deposit is with foreign banks, which are not facing any liquidity crisis at the moment, Mr. Islam said, adding that probability of near term financial impact on Bangladesh economy seems to be very remote.
World Bank Senior Economist Zahid Hussain said the foreign assistance for Bangladesh will not be affected this year despite the global financial crisis.
"But it might face an adverse impact if the international financial crisis continues for long," Mr. Hussain said, adding that the prices of Bangladeshi export items may decline in the global market because of the recession.
In 2002, the prices of Bangladesh exports dropped at least 15 per cent due to economic recession in the United States, he added.
Mr. Hussain, however, ruled out any immediate adverse impact of the global financial crisis on the flow of inward remittances.
"The inflow of remittances may be affected as medium and long term effects of the global financial crisis," the World Bank economist said, adding that the flow of inward remittances will depend on oil prices and construction sector performance in the Middle Eastern countries.
Managing Director and Country Officer of the Citibank NA Mamun Rashid presided over the seminar while President of the Bangladesh Enterprise Institute Farooq Sobhan, Chief Executive Officer of the Foreign Trade Institute MA Taslim, Chairman of the Association of Bankers, Bangladesh (ABB) K Mahmood Sattar and Ambassador Masud Aziz spoke on the occasion as panel discussants.
Mentioning about massive depreciation of Pakistani and Indian Rupees against the US dollar the Citibank country chief stressed on the introduction of a competitive exchange rate to ensure competitiveness of local export in the global market.
"The regulators and other stakeholders do need to look at the issue of competitiveness also," Mr. Mamun said, adding that the future of Bangladesh lies in its emergence as a trading nation.
"What we need are better election, better government and better accountability of the bureaucracy," he said.
Former foreign secretary Farooq Sobhan said the US economic performance is important for Bangladesh, particularly in relation to RMG exports. The performance of the European economy is also important for the country, he added.
About exchange rate, he also said India and Pakistan have already changed their exchange rates against the US dollar aiming to make their export competitive in the global market.
"Indian and Pakistani exports have become more competitive than that of Bangladesh in the international market," the former foreign secretary said.
MA Taslim said the ongoing financial crisis has both positive and negative impact on the country's economy. One positive gain is that the prices of all commodities, including edible oil, have already declined in the global market, he added.
"Prices of most commodities are declining in the global market. Certainly we would gain out of it," Mr. Taslim said, adding that the declining commodity prices would reduce the country's import costs.