Reversing the economic slowdown
Friday, 30 November 2007
M. A Rahman
AN economic slowdown with less of business and industrial activities, always proves to be a difficult time for a country. It throws many out of jobs.
Increasing unemployment and falling income and output mark the current situation concerning the economy of Bangladesh. National income and output, and gross domestic product (GDP) and its growth have fallen and are getting lower. Economists anticipate a fall in growth rate. Unless corrective steps are taken now, the economy was likely to be in a greater trouble in the near future. To reverse the situation the government needs to pull the economy out of the current problems by adopting suitable policies.
Those who became unemployed cannot buy anymore. Sale of goods and services, apartments, durables as well as essentials have dropped because the consumers' remained static while the prices have sky-rocketed. Investment in business is on the decline due to a host of factors. Remedial steps are either proving to be ineffective in tackling the situation or there is a lack of the needed action. Foreign investment has come down.
Our products need to be competitive in international market. Our exports including those of apparels are showing some unsteady signs. Our net export has not increased. Trade imbalance continues to rise.
So much dependent on imports we cannot stop or cut down fuel and many essential goods from abroad though their prices have increased in the international market.
Reduced profit margin, among other factors, has led to less of imports than needed for the projected economic growth. The demand for goods and services have decreased, lowering national income and output as well as living standards.
Cost of production has gone up due to increased import prices of fuel and raw materials. The economic scenario has been complicated by higher unemployment, and recent floods followed by the cyclone. Goods and services are in short supply.
What economic policy is needed now'? Should we take a policy to decrease money supply or to reduce the budget deficit, or to increase the tax rate? Any of the measures will further slow down the economy. Since our inflation is driven more by cost than by a demand pull, no policy that could squeeze demand further would provide a solution. An increase in demand calls for supportive expansionary fiscal or tax policies.
An expansionary economic policy would increase the demand for goods and services. Increase of money supply, or that of the budget deficit further, or increase of both, can contribute to an increased purchasing power of consumers to offset the impact of to help overcome the problems in a stagnant situation. A cut in taxes could increase the demand and supply but at the same time boost total tax receipts. A policy to boost supplies would take care of the prices.
AN economic slowdown with less of business and industrial activities, always proves to be a difficult time for a country. It throws many out of jobs.
Increasing unemployment and falling income and output mark the current situation concerning the economy of Bangladesh. National income and output, and gross domestic product (GDP) and its growth have fallen and are getting lower. Economists anticipate a fall in growth rate. Unless corrective steps are taken now, the economy was likely to be in a greater trouble in the near future. To reverse the situation the government needs to pull the economy out of the current problems by adopting suitable policies.
Those who became unemployed cannot buy anymore. Sale of goods and services, apartments, durables as well as essentials have dropped because the consumers' remained static while the prices have sky-rocketed. Investment in business is on the decline due to a host of factors. Remedial steps are either proving to be ineffective in tackling the situation or there is a lack of the needed action. Foreign investment has come down.
Our products need to be competitive in international market. Our exports including those of apparels are showing some unsteady signs. Our net export has not increased. Trade imbalance continues to rise.
So much dependent on imports we cannot stop or cut down fuel and many essential goods from abroad though their prices have increased in the international market.
Reduced profit margin, among other factors, has led to less of imports than needed for the projected economic growth. The demand for goods and services have decreased, lowering national income and output as well as living standards.
Cost of production has gone up due to increased import prices of fuel and raw materials. The economic scenario has been complicated by higher unemployment, and recent floods followed by the cyclone. Goods and services are in short supply.
What economic policy is needed now'? Should we take a policy to decrease money supply or to reduce the budget deficit, or to increase the tax rate? Any of the measures will further slow down the economy. Since our inflation is driven more by cost than by a demand pull, no policy that could squeeze demand further would provide a solution. An increase in demand calls for supportive expansionary fiscal or tax policies.
An expansionary economic policy would increase the demand for goods and services. Increase of money supply, or that of the budget deficit further, or increase of both, can contribute to an increased purchasing power of consumers to offset the impact of to help overcome the problems in a stagnant situation. A cut in taxes could increase the demand and supply but at the same time boost total tax receipts. A policy to boost supplies would take care of the prices.