Realistic export earnings amidst global economic turmoil

The world is going through turbulent times, with a war in Europe and a sharply polarized world order having an adverse impact on trade, commerce, economic growth and society in general.

Amidst such uncertainty, making any predictions about either economy or geopolitics would not be wise. The manifestation of the fall-out from the Ukraine war is all around us, from a South Asian nation teetering on the brink of collapse to volatile foreign exchange markets to soaring inflation – signs of unrest in all sectors are too conspicuous to neglect. Of course, Bangladesh has achieved a landmark export earning target of $10 billion to the USA but the milestone was reached through uninterrupted commercial operation before the conflict.

A TBP report, published yesterday, once again underlines a global economic unease while analyzing the country’s export target of $58 billion for the fiscal year 2023.

For 2023, the export target of garments is $47 billion which was $ 42.61 billion last year. However, it must be taken into account that falling prices of cotton will also impact the product cost.

For Bangladesh, a stable Europe is crucial because fifty per cent of our exports go to this region. The Ukraine imbroglio, displaying unmistakable signs of a prolonged war, is now affecting all aspects of commerce with Bangladesh. We will soon feel the pinch as work orders may decline.

It is simple economics that when inflation is high people resort to austerity and adopt a frugal way of living. As several major EU nations are experiencing an alarming rise in inflation, consumers will move to become more conservative in their spending habits.

This means decreasing orders for Bangladesh and a fall in export earnings. The USA, another major market for RMG made in Bangladesh, has seen record inflation with several leading economists predicting a recession.

We have seen in 2008-9, when the US housing market bubble burst and the subprime crisis spilled over, that a slowdown severely hampers import plus buyers’ mood.

It is widely seen that when consumers are happy they spend; however, with the war appearing to show signs of a long drawn-out affair, the upbeat mood may not come back too soon.

In assessing the war’s impact on global trade it cannot be forgotten that this is not any run-of-the-mill conflict but one which has created two sharply defined sides among top nations. If the conflict had not involved the major powers then it would not be so damaging.

Fortunately, it’s not all doom and gloom because as per the TBP report, demand for leather items is still high. Earning from this sector was $ 1 billion last year with the set target of $1.2 billion in the coming fiscal.

The jute sector earned $ 1.13 billion in export earnings in the last fiscal taking into consideration the current global circumstances, the set target for the coming fiscal is $1.2 billion.

In the current condition, Bangladesh needs to have a strategic approach which will aim to expand the market beyond the current comfort zone. For too long we have focused on Europe and the USA; it’s time to aggressively seek out new territories which are least affected by the war. Just recently, Argentina expressed interest to open an embassy and explore trade opportunities with Bangladesh which is indeed a favourable development. Reaching out to African states, especially the ones with relatively strong economies like Ghana, Algeria and Morocco can be pursued along with exploring other South American nations.

In times of economic volatility, a nation has to adapt to changing global conditions and therefore, export targets can be divided into four quarters, because three months from now, the world may face different conditions.