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Economy to get a breather: MCCI

Staff Correspondent
20 Nov 2022 00:00:00 | Update: 20 Nov 2022 00:14:58
Economy to get a breather: MCCI

The Metropolitan Chamber of Commerce and Industry (MCCI) has projected a positive trend for Bangladesh’s major economic indicators in the second quarter of FY23, despite the country’s macroeconomy facing severe pressure from a multitude of factors.

Bangladesh has been navigating through troubled waters because of the high USD rate, soaring import payments, negative current account balance, weak remittance inflow, and steadily declining foreign exchange reserves.

Despite the ongoing crisis, MCCI projected that export and remittance income will go up slightly in the October-December period, but the existing high growth of import payment will decline a little. As a result, forex reserves will somewhat increase and inflation would decline.

The chamber made these observations in its review of economic situation in Bangladesh for July – September 2022 (Q1 of FY23) published on Saturday.

It predicted that the export earnings will be $4.39 billion in November and $4.43 billion in December during this calendar year. It should be noted that Bangladesh’s export income was $4.36 billion in October this year.

Import payments were $7.21 billion in October, which will be $7.23 billion in November and $7.26 in December. Remittance income was $1.54 billion in October, which will be $1.56 in November and $1.59 in December.

As a result, a positive impact will befall the foreign exchange reserves. The chamber projected that the reserve position will be $35.39 in November and $35.99 billion in December. The reserves stood at $35.81 billion in October.

The International Monetary Fund (IMF) had told Bangladesh to cut $8 billon from its existing reserves position as $7 billion was provided in the Export Development Fund (EDF), and other $1 billion for infrastructure development.

Bangladesh had also provided a $200 million in loans to Sri Lanka.

Besides, inflation will decline to 8.95 per cent in November and 8.80 per cent in December which was 9 per cent in October, the MCCI review also pointed out.

‘Govt needs to take some measures’

To overcome the macro-economic pressure, the government needs to take some measures to stabilise foreign exchange reserves, manage inflation, enhance revenue generation, ensure electricity and gas supply for economic activities, and extend social safety net programs.

The review highlighted that load shedding of electricity takes a turn for the worse in Dhaka and elsewhere across the country, disrupting activities in households and businesses.

According to the BPDB data, the power plants supplied 12,466MW of electricity against a demand for 13,306 mw at sub-station end (evening peak) on 30 September 2022, forcing the authorities to cut off supply across the country in rotation to tackle a shortage of 840 mw. The chamber urges the government to ensure uninterrupted electricity and gas supply for continued economic activities.

The net foreign direct investment (FDI) in July-September of FY23 increased by 21.87 per cent to $457 million from $375 million in July-September of FY22, show the Bangladesh Bank’s balance of payments data.

On the other hand, the gross inflow of FDI during July-September of FY23 also increased year-on-year by 27.78 per cent to $1,159 million, from $907 million.

FDI inflow in Bangladesh is low compared to that in many other countries at similar level of development, and the chamber suggested taking initiatives to further boost the FDI.

The MCCI observed that the government took quick and decisive measures to address the economic fallout from the pandemic, which facilitated a faster and robust recovery, but the war in Russia-Ukraine interrupted it. As a result, global commodity prices are rising, slowdown in external demand, and supply-chain disruptions have let to setbacks, not only in Bangladesh but in several countries around the world.

These developments have led to a rise in inflation, decrease in remittances, and the widening of current account deficit. Taka has come under pressure and foreign exchange reserves have declined sharply, mentions the MCCI review.

However, the economy has been showing some signs of recovery. Export earnings have facilitated economic recovery in recent times. The export-oriented garment, leather, plastic, jute and domestic market-oriented steel, food-processing and transport sectors are now running in full scale.

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