Is recession imminent?

About 17 crore people of the country are counting the days in doubt, fear and thinking about the global recession situation of 2023. Already we have almost crossed the year 2022. On December 31st, after 12:00 PM, we will see a new year opening episode. We are already in the rank of developing country from the status of least developed countries. But in 2026, will it be possible to achieve the status? But that is not an easy thing. There are many obstacles and challenges on this path. The world has already experienced various crises including wars. Experts say that recession will engulf the world. Along with other countries of the world, we will continue to suffer from the risks of noise pollution, air pollution and climate change. Besides, the polluted environment will lead to various natural calamities which will slow down our emerging economic growth. Therefore, in this reality, as a development challenge in the year 2023, we have to be careful about poverty alleviation, employment, healthy immigration, education, health and service sector development, nutritious food supply and social security including guarantee of living. Some say the recession will start from 2023 and some say the global recession will take shape in 2024. However, if we are lost to a global recession or indeed a global recession hits us, it will be a massive setback to the progress we have made so far.

Bangladesh, as one of the EMDEs in Asia, is significantly prone to these risks. Unlike the recession of 2007-08, global economic factors are now affecting it significantly. There is a widening balance of payment (BOP) deficit and accelerating inflation induced by a surge in imports in the second half of FY22. The point-to-point inflation rate, according to the Bangladesh Bank, is 8.91 per cent in October 2022 – higher than the global inflation rate of 8.8 per cent (according to the IMF). Moreover, it may not resemble the real scenario as the weight to measure the inflation rate is based on outdated data. Rising commodity prices made the policymakers suppress imports, which disrupted economic activities, inducing slower economic growth projections for the coming year. Both the World Bank and the International Monetary Fund (IMF) have revised their growth projections for Bangladesh: for FY2022-23, IMF's projection is six per cent in October from 6.7 per cent in April, and for the World Bank, it is 6.1 per cent in October from 6.7 per cent in June.

Bangladesh is also seeing a sharp drop in remittance earnings, and increased imports are lowering the BOP by outweighing the export income. Consequently, the foreign exchange reserves dropped to USD 35.808 billion by the end of October 2022, the lowest in the year according to Bangladesh Bank. Policies taken to cope with higher energy prices, such as rolling blackouts and closing of energy-intensive plants, might further aggravate the existing supply constraints. The protective exchange rate management has resulted in an emerging informal dollar exchange market, making policies ineffective. According to a recent World Bank report on South Asia, on the fiscal side, the cost of subsidies for food and fertiliser increased due to higher food and fertiliser prices. Besides, the upward-moving fuel import price raised the fuel subsidy cost, resulting in an increase in fuel price domestically by an average of 50 per cent. According to the World Bank's projection, Bangladesh might face a fiscal deficit of 4.1 per cent of its GDP in FY22 and 4.9 per cent in FY23.

Besides the global crisis, Bangladesh has its own challenges to overcome. The country's LDC graduation in 2026 will bring several changes regarding market access and financial incentive programmes. We have a lower export-to-GDP ratio (less than 15 per cent) than that of other low- and middle-income countries and comparators (e.g. Vietnam). The export basket is not diversified either, heavily dependent on RMG products. In the case of import, Bangladesh has a protective tariff regime, eroding competitiveness as well as reducing export survival probabilities. Non-tariff barriers and inefficient border processes are hampering our trade, too.

The challenges that the country faces today are also rooted in its history. One of the less salubrious developments in the recent past has been the moral bankruptcy of post-colonial elites. All over the developing world, the soaring rhetoric that accompanied the independence of former colonial nations stands in stark contrast with the sordid reality of independent nations deeply mired in authoritarian repression, political intolerance, and rampant corruption. Bangladesh, alas, has not been able to escape this curse, which continues to cast an ominous shadow on its future. The sobering fact remains that Bangladesh's achievements, spectacular as they are, rest on a precariously fragile framework of governance whose quality in terms of accountability and transparency leaves a lot to be desired. There is an oft-repeated facile contention that once we achieve economic progress, it will take care of everything else. This is a dangerous myth. The underlying fault lines in governance, left unaddressed, have the potential to bring down the entire edifice tumbling down.

These challenges are all the more alarming given the current noxious post-globalized climate, where the rise of an intolerant majoritarianism finds easy prey in restive populations which are angered by the unconscionably uneven distribution of the spoils of economic globalisation. At this historic juncture, we contemplate Bangladesh's future with hope and some concern. Bangladesh has taken enormous strides in the past, and there is absolutely no reason why it cannot cross the hurdles it faces today. What we have to remember, however, is that this will only happen if we recognise the challenges and make a committed effort to address them. Unless supply disruptions and labor-market pressures subside, those interest-rate increases could leave the global core inflation rate (excluding energy) at about 5 per cent in 2023—nearly double the five-year average before the pandemic, the study finds. To cut global inflation to a rate consistent with their targets, central banks may need to raise interest rates by an additional 2 per centage points, according to the report’s model. If this were accompanied by financial-market stress, global GDP growth would slow to 0.5 per cent in 2023—a 0.4 per cent contraction in per–capita terms that would meet the technical definition of a global recession.

Will the year 2023 be a subject of blessing or curse? Will 2023 be the year of global recession? How much will the hopes and expectations of the people of the country be fulfilled in 2023? How successful will the government be in meeting the challenges of 2023? How safe and risk-free is Bangladesh in 2023? In the light of the above questions, our opinion is that we have no choice but to adopt a production-oriented action plan in Bangladesh in the future. Honorable Prime Minister is constantly giving advice in this regard. Future Bangladesh is a great promise to fulfill the possibilities and dreams. To fulfill the promise of the century, the future young generation should come forward with the great promise of Bangladesh reconstruction. For a developed and prosperous Bangladesh, all action plans and programs that can be implemented should be taken up and prepared by its intensive supervision and monitoring. And for this purpose, considering the year 2025 as step-1 and the year 2035 as step-2, the preparation of need assessment and work papers should be taken. Finally, I am expressing the opinion that the future Bangladesh should be filled with the excitement of possibilities and dreams, hopes and aspirations. May all activities in 2023 and beyond be positive and a stepping stone to building a prosperous, self-reliant Bangladesh. Only then, the dream of the father of the nation will be realized and Bangladesh will be a placed in the position of dignity and glory.

Bangabandhu Sheikh Mujibur Rahman always wanted to see the smiles in the faces of poor and unhappy people of Bengal. In each of her speeches, Prime Minister Sheikh Hasina also pledged to work for the poorest of the poor. But the capitalism is a mere coincidence. It wants to destroy all humanity, our green paddy fields, rivers, forests, air, water – everything. In the Prime Minister’s words, ‘Money making is a disease, and illness.’ When the rich are infected with this disease, they want to break the rules by breaking everything. Without a strong political commitment, the nature of this devastating disease can no longer save human nature. Our 2023 New Year’s promise must be announced for eliminating inequality and New Year’s resolution must be mandated as per promise.

The writer is former Deputy Director General, Bangladesh Ansar and VDP. He can be contacted at [email protected]