Signs are no solace
Sunday, 16 November 2008
As predicted the global financial meltdown is taking its toll on developed as well developing economies. Obviously, it is hurting the former more because of their bigger size and greater integration. But the ongoing development is unlikely to be less painful for developing economies, particularly the poorer ones because of the falling demand for goods and services in the developed countries. In the developed world, already many stellar names in business have just vanished, investors are short on confidence and scores of people have lost their jobs. And the balance of global economic power, at least, for the time being has tilted towards Asia, thanks to the trillion dollar reserve held by China.
When people started asking about the possible impact of the global financial meltdown on the Bangladesh economy, the government leaders and the central bank governor saw no reason to be alarmed. But they, it seems, have not been objective enough about how bad the crisis is. Initially, all attention was focused on export-oriented garment because of the economy's greater exposure to the earning from it. Until now no conclusive projection on the impact of RMG export is available, with some predicting a slowdown and others hoping for a business-as-usual scenario. But media reports confirm a slowdown in exports of RMG and frozen food, the second largest foreign exchange earner, to the developed economies.
But other sectors have already started taking a hit from the ongoing global financial crisis. The remittance flow, which was projected to reach a record high of US dollar 9.0 to 10 billion during the current fiscal, has started falling. The inflow in October was 17 per cent less than that of the previous month. It is feared that the inflow of remittance money from the USA, the second largest source of remittance after Saudi Arabia, might go down in coming months because of the recession in that country. Meanwhile, the benchmark index, DGEN, has touched 2675 points, shedding more than 500 points in just three to four weeks' time. There exist all the signs of a classic bear market. However, market analysts find no connection between the share market fall and the global financial meltdown because of the former's little exposure to portfolio investment.
The most ominous development that has surfaced in recent weeks has been the substantial fall in imports. This has the potential to trigger troubles for many other areas of the economy, including the banking sector. The declining import does also mean trouble for the government as far as its revenue earning is concerned. Many local businesses have stopped importing commodities because of the continuous fall in prices of the same in the global market. According to an unofficial estimate, importers have already sustained losses to the tune of Tk. 30 to Tk. 40 billion because of the erosion in commodity prices, signalling troubles for the banks that have major investments in trade-related activities. The head of the country's apex trade body met with the finance adviser last Thursday and apprised the latter of the situation. Notwithstanding the fact there are always ups and downs in commodity prices -- the same importers had made windfall profits when commodity prices soared to historic highs only a few months back -- the slowdown in commodity import would deprive the consumers of the desired level of benefits out of the price-decline in the international market.
The volume of import of essential and other commodities has, reportedly declined around 30 per cent during last couple of months and the round-the-clock busy Chittagong port has been passing a lazy time with most of its jetties remaining vacant. The slowdown in external trade is bound to create a negative impact on other areas of economy. So, it is high time for the taskforce formed by the government to devise appropriate means for addressing the problems in the context of the global financial crisis. However, inputs from the businesses should be considered essential for the needed actions.
When people started asking about the possible impact of the global financial meltdown on the Bangladesh economy, the government leaders and the central bank governor saw no reason to be alarmed. But they, it seems, have not been objective enough about how bad the crisis is. Initially, all attention was focused on export-oriented garment because of the economy's greater exposure to the earning from it. Until now no conclusive projection on the impact of RMG export is available, with some predicting a slowdown and others hoping for a business-as-usual scenario. But media reports confirm a slowdown in exports of RMG and frozen food, the second largest foreign exchange earner, to the developed economies.
But other sectors have already started taking a hit from the ongoing global financial crisis. The remittance flow, which was projected to reach a record high of US dollar 9.0 to 10 billion during the current fiscal, has started falling. The inflow in October was 17 per cent less than that of the previous month. It is feared that the inflow of remittance money from the USA, the second largest source of remittance after Saudi Arabia, might go down in coming months because of the recession in that country. Meanwhile, the benchmark index, DGEN, has touched 2675 points, shedding more than 500 points in just three to four weeks' time. There exist all the signs of a classic bear market. However, market analysts find no connection between the share market fall and the global financial meltdown because of the former's little exposure to portfolio investment.
The most ominous development that has surfaced in recent weeks has been the substantial fall in imports. This has the potential to trigger troubles for many other areas of the economy, including the banking sector. The declining import does also mean trouble for the government as far as its revenue earning is concerned. Many local businesses have stopped importing commodities because of the continuous fall in prices of the same in the global market. According to an unofficial estimate, importers have already sustained losses to the tune of Tk. 30 to Tk. 40 billion because of the erosion in commodity prices, signalling troubles for the banks that have major investments in trade-related activities. The head of the country's apex trade body met with the finance adviser last Thursday and apprised the latter of the situation. Notwithstanding the fact there are always ups and downs in commodity prices -- the same importers had made windfall profits when commodity prices soared to historic highs only a few months back -- the slowdown in commodity import would deprive the consumers of the desired level of benefits out of the price-decline in the international market.
The volume of import of essential and other commodities has, reportedly declined around 30 per cent during last couple of months and the round-the-clock busy Chittagong port has been passing a lazy time with most of its jetties remaining vacant. The slowdown in external trade is bound to create a negative impact on other areas of economy. So, it is high time for the taskforce formed by the government to devise appropriate means for addressing the problems in the context of the global financial crisis. However, inputs from the businesses should be considered essential for the needed actions.