Remittance lifeline under threat
Saturday, 13 December 2008
A Z M Anas
A falling remittances inflow is likely to dampen Bangladesh's growth prospects in the current financial year, signalling the onslaught of global financial tsunami on the country's coastline, according to a new World Bank report.
The economy, which grew by 6.2 per cent in the last fiscal year, could slump to 5.7 per cent in 2008-09, even though the country's financial sector-notably banking and capital markets--will remain remarkably unhurt, says the bank's Global Economic Prospects 2009.
A financial analyst says that notwithstanding the uncertainty in forecast, the "risks to the economy are real", although Bangladesh has remained "incredibly" resilient and stable by regional standards.
"Recession in high-income countries and a slowdown in growth among the Gulf oil exporters are expected to depress remittances inflows," says the just-released report.
A 5.0-million-strong Bangladeshi overseas class sent home around US$8.0 billion in the last fiscal and the government hopes to net $10 billion this fiscal.
The steady flow of remittances over the years has helped the country withstand pressure on its external balances, while maintaining the foreign exchange reserves at a sound level.
The deterioration in trade balances has been offset by large remittance inflows, which represent 8.0 per cent of GDP (gross domestic product).
But that lifeline is under increasing risk as the bulk or 63 per cent of the country's remittances trickle in from the oil-rich Middle-Eastern nations. Around 29 per cent come from the United States, Germany and the United Kingdom, home to half a million Bangladeshi-born British citizens.
The growth projection of the global lender, which recently came under attack from top policy makers, comes at odds with the Bangladesh Bank, which insists that the growth would not go down below 6.0 per cent in any way.
But the government, in the national budget, estimated that the economy would grow by 6.5 per cent, aided by robust farm and manufacturing growth and sustained expansion of services sector.
The Asian Development Bank, the Manila lender, came up with yet another projection, saying the Bangladesh's economy would shrink in the territory of 5.5 per cent to 6.0 per cent as dampened global demand could weigh on exports and workers' remittances.
"Bangladesh remains incredibly resilient and the private sector should be credited for this. You see, China and India are to experience major slowdowns in their economies. So, if Bangladesh grows 5.7 per cent, it will be great," said Ifty Islam, who heads Dhaka-based Asian Tigers Capital, a private equity firm.
"There are extreme recession risks (in the developed world). The downturn is faster in the US, Europe and Japan than anticipated. These are uncertain times. Bangladesh should be ready (to face)," Mr Islam added.
Mr Islam, who has intensive research on the global and regional economies, said actual exports data and credit growth are quite strong and in the long term, the country stands to gain from the global crisis.
"In South Asia, Bangladesh remains relatively stable. The country looks like a safe place for portfolio investors," he told the Financial Express.
The report, however, gave a rosy picture of the country's merchandise exports, saying "shifts in spending to low-priced retailers" will benefit supplier nations like Bangladesh.
In contrast with broadly declining activity in the region, the report noted growth in Bangladesh held steady, with domestic demand buoyed by a sharp increase in remittance inflows and by robust garment exports recorded in the first half of 2008.
The report said the country's banking sector has been largely insulated from the crisis, given very limited exposures to the toxic debt instruments tied to U.S. sub-prime mortgages. So is the case for the capital market as the role played by foreign portfolio investors is negligible.
A falling remittances inflow is likely to dampen Bangladesh's growth prospects in the current financial year, signalling the onslaught of global financial tsunami on the country's coastline, according to a new World Bank report.
The economy, which grew by 6.2 per cent in the last fiscal year, could slump to 5.7 per cent in 2008-09, even though the country's financial sector-notably banking and capital markets--will remain remarkably unhurt, says the bank's Global Economic Prospects 2009.
A financial analyst says that notwithstanding the uncertainty in forecast, the "risks to the economy are real", although Bangladesh has remained "incredibly" resilient and stable by regional standards.
"Recession in high-income countries and a slowdown in growth among the Gulf oil exporters are expected to depress remittances inflows," says the just-released report.
A 5.0-million-strong Bangladeshi overseas class sent home around US$8.0 billion in the last fiscal and the government hopes to net $10 billion this fiscal.
The steady flow of remittances over the years has helped the country withstand pressure on its external balances, while maintaining the foreign exchange reserves at a sound level.
The deterioration in trade balances has been offset by large remittance inflows, which represent 8.0 per cent of GDP (gross domestic product).
But that lifeline is under increasing risk as the bulk or 63 per cent of the country's remittances trickle in from the oil-rich Middle-Eastern nations. Around 29 per cent come from the United States, Germany and the United Kingdom, home to half a million Bangladeshi-born British citizens.
The growth projection of the global lender, which recently came under attack from top policy makers, comes at odds with the Bangladesh Bank, which insists that the growth would not go down below 6.0 per cent in any way.
But the government, in the national budget, estimated that the economy would grow by 6.5 per cent, aided by robust farm and manufacturing growth and sustained expansion of services sector.
The Asian Development Bank, the Manila lender, came up with yet another projection, saying the Bangladesh's economy would shrink in the territory of 5.5 per cent to 6.0 per cent as dampened global demand could weigh on exports and workers' remittances.
"Bangladesh remains incredibly resilient and the private sector should be credited for this. You see, China and India are to experience major slowdowns in their economies. So, if Bangladesh grows 5.7 per cent, it will be great," said Ifty Islam, who heads Dhaka-based Asian Tigers Capital, a private equity firm.
"There are extreme recession risks (in the developed world). The downturn is faster in the US, Europe and Japan than anticipated. These are uncertain times. Bangladesh should be ready (to face)," Mr Islam added.
Mr Islam, who has intensive research on the global and regional economies, said actual exports data and credit growth are quite strong and in the long term, the country stands to gain from the global crisis.
"In South Asia, Bangladesh remains relatively stable. The country looks like a safe place for portfolio investors," he told the Financial Express.
The report, however, gave a rosy picture of the country's merchandise exports, saying "shifts in spending to low-priced retailers" will benefit supplier nations like Bangladesh.
In contrast with broadly declining activity in the region, the report noted growth in Bangladesh held steady, with domestic demand buoyed by a sharp increase in remittance inflows and by robust garment exports recorded in the first half of 2008.
The report said the country's banking sector has been largely insulated from the crisis, given very limited exposures to the toxic debt instruments tied to U.S. sub-prime mortgages. So is the case for the capital market as the role played by foreign portfolio investors is negligible.