Getting to grips with global recession
Tuesday, 25 November 2008
THE price-hike of food grains and fuel oil was causing serious fiscal strains in both rich and poor countries across the globe. The price of fuel oil, which about quadrupled in five years between 2003 and 2008, did make a dent in the public purse even in most advanced economies. So, it is not hard to imagine how it affected the least developed economies like Bangladesh. A Bangladesh Bank policy paper quoting a report of the World Bank said Bangladesh lost a total of 7.7 per cent of it Gross Domestic Product (GDP) in five years between 2003 and 2008 due to trade shock caused by unrestrained surge in the prices of fossil fuel and foodstuffs. The fuel price-hike was continuously draining the country's budgetary resources, when the sudden spike in food price in the international market put the country's economy through the worst challenge in recent history. In fact, the skyrocketing food price did not manifest itself only through the abstract figures of budgetary strain. The common people, especially those belonging to the limited income group, the jobless and especially the vast number of rural poor, were also precariously exposed to this situation.
The import of food grains cost the economy more heavily than that of fuel as it caused an erosion of 3.1 per cent of GDP compared to 2.1 per cent due to that of fuel over the period in question. The government had to make do with its limited hard currency reserve earned through exports and foreign remittance. Of late, the global economy is experiencing another kind of shock caused by thoughtless use of money and capital resources mainly by the Wall Street financial moguls in the USA. The hole in the US financial market is fast spreading engulfing one country after another. And this new financial phenomenon is marked by a trend that is quite opposite of what was noticed during the global price-surge. In the present situation, the prices of both fossil fuel and food grains are sliding very fast down the price curve.
Does this situation bode well for Bangladesh? As ill luck would have it, the global economic slump cuts both ways like a double-edged sword. Price fall cannot help countries like Bangladesh, because it also implies reduced consumer demand in the highly industrialised nations. Both the major destinations of Bangladesh's export, the US and the European Union (EU) markets, have been worst affected by the acute financial crunch. That means this country runs the risk of earning less from export. Worse still, the slump in the Western economies also means less earning from its expatriate wage earners.
So, the ongoing recession in the rich economies with attending fall in the overall price index will not bring any good for Bangladesh economy either. As in the previous cycle of sharply climbing prices, Bangladesh economy will again have to face the risk of reduced inflow of foreign currency both in terms of export earnings and foreign remittance. Economic recession in the very rich economies of the northern hemisphere also means that there will be less foreign aid and investment forthcoming in the coming days.
So, both the regimes of upward price spiral and economic downslide in the international market will unluckily be leaving a negative impact on Bangladesh economy. In this context, the real challenge before the government will be to cushion the limited income group and the poor from the blow of the ups and downs of the world economy. Bangladesh has to learn its own lesson from the recent vicissitudes of global economy. It is that the issue of economic growth and development cannot be left either to the private sector or to the government alone. A pragmatic mix of the two is necessary to avoid the kind of perilous waters the Western economies are now wading through.
The import of food grains cost the economy more heavily than that of fuel as it caused an erosion of 3.1 per cent of GDP compared to 2.1 per cent due to that of fuel over the period in question. The government had to make do with its limited hard currency reserve earned through exports and foreign remittance. Of late, the global economy is experiencing another kind of shock caused by thoughtless use of money and capital resources mainly by the Wall Street financial moguls in the USA. The hole in the US financial market is fast spreading engulfing one country after another. And this new financial phenomenon is marked by a trend that is quite opposite of what was noticed during the global price-surge. In the present situation, the prices of both fossil fuel and food grains are sliding very fast down the price curve.
Does this situation bode well for Bangladesh? As ill luck would have it, the global economic slump cuts both ways like a double-edged sword. Price fall cannot help countries like Bangladesh, because it also implies reduced consumer demand in the highly industrialised nations. Both the major destinations of Bangladesh's export, the US and the European Union (EU) markets, have been worst affected by the acute financial crunch. That means this country runs the risk of earning less from export. Worse still, the slump in the Western economies also means less earning from its expatriate wage earners.
So, the ongoing recession in the rich economies with attending fall in the overall price index will not bring any good for Bangladesh economy either. As in the previous cycle of sharply climbing prices, Bangladesh economy will again have to face the risk of reduced inflow of foreign currency both in terms of export earnings and foreign remittance. Economic recession in the very rich economies of the northern hemisphere also means that there will be less foreign aid and investment forthcoming in the coming days.
So, both the regimes of upward price spiral and economic downslide in the international market will unluckily be leaving a negative impact on Bangladesh economy. In this context, the real challenge before the government will be to cushion the limited income group and the poor from the blow of the ups and downs of the world economy. Bangladesh has to learn its own lesson from the recent vicissitudes of global economy. It is that the issue of economic growth and development cannot be left either to the private sector or to the government alone. A pragmatic mix of the two is necessary to avoid the kind of perilous waters the Western economies are now wading through.