Fallouts from global recession to be less severe for Bangladesh
Saturday, 28 March 2009
FE Report
Bangladesh is set to be one of the few countries in the Asia-Pacific region which will suffer less than others from the global economic slowdown that has come in the aftermath of the financial crisis.
Bangladesh achieved robust growth of 6.2 per cent in 2008, down only slightly from 6.4 per cent in 2007 despite back-to-back floods and a devastating cyclone.
With the global economic crisis deepening, growth of Bangladesh's economy is expected to further ease to 5.5 per cent in 2009, according to the Economic and Social Survey of Asia and the Pacific-2008 that was released Thursday.
This year's issue of the flagship publication of the United Nations' regional arm - the Economic and Social Commission for Asia and the Pacific (ESCAP) -is titled "Addressing Triple Threats to Development." It analyses the three global crises which have converged to threaten development in the Asia-Pacific region: the financial crisis, fuel and food prices, and climate change.
The survey provides a regional perspective as well as country-specific analyses, outlining ways in which economies in the region can move forward in unison towards a more inclusive and sustainable development path.
Inflation has been driven up in all the countries of South Asia, partly by unrelenting pressures from higher international commodity prices, particularly the prices of oil, basic metals and selected food items. Inflation in Bangladesh in 2008 rose to around 10 per cent, up from 7.2 per cent in 2007. With the fall in oil and other commodity prices in international markets, inflation is expected to come down in 2009.
In Bangladesh, the fiscal deficit as a percentage of gross domestic product increased from 3.7 per cent in 2007 to 4.8 per cent in 2008, despite healthy growth in government revenue. The pressure on the fiscal balance increased due to large increases in spending on flood and cyclone relief work and an expansion of subsidies following the rise in fuel, fertiliser and grain prices on international markets. Fiscal policy is expected to remain expansionary to promote growth and employment, while subsidies on food and fertilizer are expected to remain in place to contain inflation and boost the production of agricultural crops.
The surge in prices of fuel oil, food and other commodities created severe problems for the external balances of most countries in South Asia. However, in Bangladesh, despite an increasing trade deficit propelled by higher imports, the current account balance showed a surplus resulting from robust growth in export earnings and workers' remittances.
The inflow of workers' remittances increased by one-third, reaching nearly $8 billion in the fiscal year of 2008. If the global economic crisis persists for a longer period, workers' remittances may fall in the coming years, causing difficulties for balance of payments.
Among long-term challenges, poverty remains a major problem for most countries in South Asia. Also, economic and social inequalities remain widespread. The main challenge for countries in the subregion, therefore, is not only to improve growth rates on a sustained basis but also to make them more inclusive for a rapid reduction in poverty and inequality.
The composition of sectoral growth has important implications for pro-poor growth. Agriculture, construction and small and medium enterprises (SMEs) generate pro-poor growth through employment generation, and should be supported.
Bangladesh is set to be one of the few countries in the Asia-Pacific region which will suffer less than others from the global economic slowdown that has come in the aftermath of the financial crisis.
Bangladesh achieved robust growth of 6.2 per cent in 2008, down only slightly from 6.4 per cent in 2007 despite back-to-back floods and a devastating cyclone.
With the global economic crisis deepening, growth of Bangladesh's economy is expected to further ease to 5.5 per cent in 2009, according to the Economic and Social Survey of Asia and the Pacific-2008 that was released Thursday.
This year's issue of the flagship publication of the United Nations' regional arm - the Economic and Social Commission for Asia and the Pacific (ESCAP) -is titled "Addressing Triple Threats to Development." It analyses the three global crises which have converged to threaten development in the Asia-Pacific region: the financial crisis, fuel and food prices, and climate change.
The survey provides a regional perspective as well as country-specific analyses, outlining ways in which economies in the region can move forward in unison towards a more inclusive and sustainable development path.
Inflation has been driven up in all the countries of South Asia, partly by unrelenting pressures from higher international commodity prices, particularly the prices of oil, basic metals and selected food items. Inflation in Bangladesh in 2008 rose to around 10 per cent, up from 7.2 per cent in 2007. With the fall in oil and other commodity prices in international markets, inflation is expected to come down in 2009.
In Bangladesh, the fiscal deficit as a percentage of gross domestic product increased from 3.7 per cent in 2007 to 4.8 per cent in 2008, despite healthy growth in government revenue. The pressure on the fiscal balance increased due to large increases in spending on flood and cyclone relief work and an expansion of subsidies following the rise in fuel, fertiliser and grain prices on international markets. Fiscal policy is expected to remain expansionary to promote growth and employment, while subsidies on food and fertilizer are expected to remain in place to contain inflation and boost the production of agricultural crops.
The surge in prices of fuel oil, food and other commodities created severe problems for the external balances of most countries in South Asia. However, in Bangladesh, despite an increasing trade deficit propelled by higher imports, the current account balance showed a surplus resulting from robust growth in export earnings and workers' remittances.
The inflow of workers' remittances increased by one-third, reaching nearly $8 billion in the fiscal year of 2008. If the global economic crisis persists for a longer period, workers' remittances may fall in the coming years, causing difficulties for balance of payments.
Among long-term challenges, poverty remains a major problem for most countries in South Asia. Also, economic and social inequalities remain widespread. The main challenge for countries in the subregion, therefore, is not only to improve growth rates on a sustained basis but also to make them more inclusive for a rapid reduction in poverty and inequality.
The composition of sectoral growth has important implications for pro-poor growth. Agriculture, construction and small and medium enterprises (SMEs) generate pro-poor growth through employment generation, and should be supported.