Sluggish global trade and Bangladesh

Global trade posted another year of growth, in the process of a rebound, despite war and inflation coming in the way. Overall trade reached a record US$32 trillion in last year against $27.6 trillion in 2021. The trade in goods accounted for around $25 trillion in 2022, an increase of about 11 per cent from $22 trillion in 2021. Trade in services, however, posted higher growth of 15 per cent in the last year to $7 trillion which was $5.6 trillion in 2021. The United Nations Conference on Trade and Development (UNCTAD) mainly attributed the jump in global trade to a robust growth in the first half of 2022. The second half of the year showed a sluggish trend mainly due to negative impact of the Russia-Ukraine war.
The World Trade Organization (WTO), in its latest report released Wednesday, said that global trade in goods in terms of volume registered 2.70 per cent growth last year which was 'smaller-than-expected increase that was pulled down by a sharp slump in the fourth quarter' of 2022. In value terms, world merchandise trade grew by around 12 per cent in the past year to US$ 25.26 trillion, according to the WTO estimate. This growth is slow compared to 2021, when merchandise trade recorded a 27 per cent rebound after a 5.3 per cent decline in 2020. Global merchandise trade in 2022 was, however, significantly up by 32 per cent compared to its pre-pandemic level in 2019.
The WTO said that the growth in the value of merchandise trade was inflated in part by high global commodity prices. It also found that the fastest-growing sectors were those related to energy. For instance, in 2022, fuel trade registered a growth of 61 per cent. The WTO report, titled 'Global Trade Outlook and Statistics', also mentioned that the value of world commercial services trade jumped by 15 per cent in 2022 to $6.8 trillion and digitally delivered services exports were worth $3.82 trillion in the year under review.
The global trade body also projected that weighed down by the 'effects of the war in Ukraine, stubbornly high inflation, tighter monetary policy and financial- market uncertainty', the world merchandise-trade volume is likely to grow by only 1.70 per cent in the current year. Thus, the world is going to see a sluggish trend in trade in 2023. Besides the inflationary pressure and monetary tightening, trouble in the banking sector in the United States (US) and Europe may lead to wider financial instability in the global economy.
BANGLADESH SITUATION: Bangladesh's international trade in goods crossed US$140 billion in the last year, recording a 14.60 per cent growth over the previous year. The total trade in goods in the previous year, or 2021, was around $124.70 billion. In fact, the country's total trade with the rest of the world rebounded strongly in 2021 by registering a growth of 44 per cent over the year 2020 when the Covid-19 pandemic took a heavy toll, shattering trade and economy. Trade in goods declined by 12 per cent in 2020.
Last year, exports jumped by 23 per cent while imports posted a modest growth of 9.70 per cent. Value of exports and imports stood at around $54.70 billion and $88.30 billion respectively. According to the WTO report, Bangladesh became the 29th leading importer in world merchandise trade (excluding intra-EU trade or trade in goods between European Union member states) last year. The country's share in global merchandise imports stood at 0.40 per cent the year.
After posting a record 53 per cent growth in imports of goods in 2022, when annual value of imports first time touched $80 billion, Bangladesh actually experienced a lower growth in the last year. A number of factors slowed down the growth of imports in the country.
The negative impact of Russia-Ukraine war on the world market increased the prices of commodities and intermediate goods and also the cost of shipping. All this makes the imports costly for Bangladesh. During the second half of the year, the country also faced a big pressure in exchange rate which forced depletion of the foreign-exchange reserves. Bangladesh Bank imposed some restrictions on import of less-essential and non-essential commodities to reduce the pressure on the foreign- exchange reserves. The restrictive steps resulted in slowdown in the growth of imports.
The slower trend in import continues in the current year as merchandise imports dropped by 30 per cent in the first two months of 2023 to $11.51 billion from $16.65 billion in January-February last year. The trend is likely to continue during the rest of the year as Bangladesh has already started tightening its monetary policy to contain the inflationary pressure. To curb import-induced inflation, restrictions on imports need to continue for the time being. The restraint may also help cover some shortage in the foreign-exchange earning which is dependent on export earnings and remittance.
Though there is an upward trend in exports, the growth rate has already turned sluggish in the current year. It registered around 3.50 per cent growth in the first three months of the current year over the same period last year. So, besides imports, exports have also started to slow down, which may lead to making the overall trade slower in the current year. Though the trade deficit may get narrowed, easing pressure on the foreign-exchange reserves, slower trade means slower economic growth.
From being an aid-dependent country, Bangladesh has transformed itself to a trade-dependent economy, and trade is the engine of the country's growth for the last two decades. With gradual liberalisation of trade, Bangladesh economy has advanced significantly. Trade is, however, largely linked to external factors and so the trade-related measures need to be adjusted accordingly.
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