Steering economy through troubled times
Saturday, 20 December 2008
THE debate on how Bangladesh will fare amid the global financial crunch is still on. The global lending institution, the World Bank (WB), for example, has come up with its unsettling report of how the economic slowdown in the Middle-Eastern countries may severely affect the inflow of remittance thereby reducing the economic growth down to 5.7 per cent, a forecast that comes into conflict with the rather upbeat projection of 6.5 growth made by the government in the current national budget. The depressing WB report, however, lays emphasis on the uncertainties in the Middle-Eastern share of the incoming remittance, which is 63 per cent of the total. It has to be admitted that the foreign remittance bolsters our foreign exchange reserve in a great way and helps to maintain the balance of payment. So, any serious blow to that remittance flow is sure to impact the growth prospects.
Meanwhile, the Asian Development Bank (ADB), too, has more or less made a similar prognostication of the country's growth prospects in the face of global recessionary trend saying that the economic growth may come down between 5.5 and 6.0 per cent. There are strong reasons to be sober, given the fact that the Gulf nations that employ 63 per cent of the 5.0 million-strong Bangladeshi diaspora has been going through very difficult times marked by sharp fall in the consumption of oil in the highly advanced economies. Needless to say, oil is the chief source of income of the Gulf region and other oil-rich nations of the Middle East. It is not hard to imagine the consequence of the sudden drop in the earning of petrodollar by these countries. So, how long would it be possible on Bangladesh's part to keep itself untouched by the still unfolding financial crunch in the rest of the world?
One has also to keep into sharp focus the developments in our immediate neighbourhood such as in India and China. The economies of these two Asian giants have already been weighed down by the slowdown in the rest of the developed world. It would, therefore, be very unrealistic to consider that Bangladesh would forever remain insulated from the financial tsunami that has been ripping through the leading economies. Given the less-than-rosy scenario depicted in the foregoing, what should be Bangladesh's own policy response? It has been said more than once in this column that the government in office must avoid the indulgence of any kind of complacency while the major players in the global economy are in the throes of an unforeseen downturn since the third decade of the last century.
Despite the centrifugal pulls all around, Bangladesh economy has so far been sailing quite smoothly. Even in the last fiscal, the country earned some US$8 billion in terms of foreign remittance sent home by the overseas wage earners. If everything goes well, the volume of remittance would register a further rise to US$10 billion in the current fiscal, defying all scary projections to the contrary. The export sector, the other major source of foreign currency earning, has not yet been adversely impacted by the recessionary pressure from the developed economies. Meanwhile, on the domestic front, the private sector-led manufacturing and the service industries are performing well, while the higher volume of foreign remittance coupled with healthy trend of export, led especially by the garments sector, is keeping the internal demand propped up.
So far so good. But common sense dictates that there are still reasons enough to be cautious and conservative, as there is no sign that the ongoing recession in the developed economies is abating. On the contrary, it is fast spiralling downward into a deep depression. In the circumstances, the government should be on the alert and keep every option open to offset any adverse impact of the economic crisis still unfolding in the West.
Meanwhile, the Asian Development Bank (ADB), too, has more or less made a similar prognostication of the country's growth prospects in the face of global recessionary trend saying that the economic growth may come down between 5.5 and 6.0 per cent. There are strong reasons to be sober, given the fact that the Gulf nations that employ 63 per cent of the 5.0 million-strong Bangladeshi diaspora has been going through very difficult times marked by sharp fall in the consumption of oil in the highly advanced economies. Needless to say, oil is the chief source of income of the Gulf region and other oil-rich nations of the Middle East. It is not hard to imagine the consequence of the sudden drop in the earning of petrodollar by these countries. So, how long would it be possible on Bangladesh's part to keep itself untouched by the still unfolding financial crunch in the rest of the world?
One has also to keep into sharp focus the developments in our immediate neighbourhood such as in India and China. The economies of these two Asian giants have already been weighed down by the slowdown in the rest of the developed world. It would, therefore, be very unrealistic to consider that Bangladesh would forever remain insulated from the financial tsunami that has been ripping through the leading economies. Given the less-than-rosy scenario depicted in the foregoing, what should be Bangladesh's own policy response? It has been said more than once in this column that the government in office must avoid the indulgence of any kind of complacency while the major players in the global economy are in the throes of an unforeseen downturn since the third decade of the last century.
Despite the centrifugal pulls all around, Bangladesh economy has so far been sailing quite smoothly. Even in the last fiscal, the country earned some US$8 billion in terms of foreign remittance sent home by the overseas wage earners. If everything goes well, the volume of remittance would register a further rise to US$10 billion in the current fiscal, defying all scary projections to the contrary. The export sector, the other major source of foreign currency earning, has not yet been adversely impacted by the recessionary pressure from the developed economies. Meanwhile, on the domestic front, the private sector-led manufacturing and the service industries are performing well, while the higher volume of foreign remittance coupled with healthy trend of export, led especially by the garments sector, is keeping the internal demand propped up.
So far so good. But common sense dictates that there are still reasons enough to be cautious and conservative, as there is no sign that the ongoing recession in the developed economies is abating. On the contrary, it is fast spiralling downward into a deep depression. In the circumstances, the government should be on the alert and keep every option open to offset any adverse impact of the economic crisis still unfolding in the West.