Export, import to fall by 7.2%, 22.6% in FY23: IMF

Although Bangladesh has seen 6.70 per cent year-on-year growth in goods and service export in July-October of FY2022-23, the International Monetary Fund (IMF) has projected that the country’s export earnings will drop by 7.2 per cent at the end of this fiscal year.

Bangladesh saw a 10.58 per cent goods export growth in the first half of FY23. In FY2021-22, the country posted 34.39 per cent year-on-year goods and service export growth to $60.97 billion.

However, Bangladesh Bank has projected that the country’s export earnings will increase by 10 per cent at the end of FY23.

On the other hand, according to IMF projections, the country’s import amount will decline by 22.6 per cent year-on-year at the end of FY23. In FY22, businesses had opened LCs worth $92.23 billion to import goods.

In a press release issued on Monday, the global lender also projected that the country’s export and import are likely to go up by 8.6 per cent and 14.2 per cent, respectively, year-on-year in FY2023-24.

Thanks to low import trends, the trade balance gap is likely to reduce to negative 7.6 per cent in FY23, from negative 10.8 per cent in FY22, according to IMF projections.

Moreover, it warned that Bangladesh’s foreign exchange reserve will decline to $30 billion by the end of FY23, from $33.4 billion in FY22, despite 5.1 per cent year-on-year growth in remittance inflow and IMF financial support because of low export earnings.

However, the reserve will improve to $34.2 billion in FY24, it added.

For the many negative indicators, IMF projected that Bangladesh’s GDP growth is likely to go down to 5.5 per cent year-on-year in FY23, which was 7.2 per cent in FY22. The growth will increase to 6.5 per cent and 7.1 per cent in FY24 and FY2024-25, respectively.

It also said that public consumption of GDP is likely to decline by 7.2 per cent year-on-year in FY23, but it will rise by 4.7 per cent in FY24.

“I don’t agree with the estimation. I believe Bangladesh’s exports will grow by at least 10 per cent in FY23. IMF doesn’t have much knowledge about Bangladesh’s economy and its strength,” Policy Research Institute Executive Director Ahsan H Mansur told The Business Post.

He said IMF made the projections based on global export trends, which does not apply to Bangladesh. “That’s why they projected negative growth.”

Ahsan argued that Bangladesh has benefited the most due to business relocation from China. The country’s zero Covid policy also became an opportunity for Bangladesh, which is also set to benefit from the geopolitical shifts.

Depreciation of the taka against the US dollar is also another advantage for Bangladeshi exporters as it will increase competitiveness in the global market, he added.

However, IMF Communications Officer Huong Lan Vu (Pinky) told The Business Post, “We take note of an actual outturn of export value growth of 11.8 per cent in the first five months of FY23, a sharp slowdown from 33 per cent growth in FY22.”

She continued, “Excluding the change in export prices, the export growth is projected to decline by 7.2 per cent for FY23 in real terms.

“In addition to elevated global uncertainty, this decline in export growth (real terms) reflects slower growth in Bangladesh’s major trading partners e.g., the US and EU, suppressing demand for Bangladesh exports.”

Present export scenario

According to the Export Promotion Bureau (EPB), Bangladesh posted 10.58 per cent year-on-year export growth to $27.31 billion in the first half of FY23. During the period, every major sector except apparel and leather had posted negative earnings.

However, the Utilisation Declaration (UD) permissions, which indicate the export order trend, are on a steep decline for local apparel exporters — evidenced by the fact that the first half of FY23 witnessed only a 2.5 per cent year-on-year growth, compared to 7.27 per cent in FY22.

According to Bangladesh Garment Manufacturers and Exporters Association (BGMEA), its members recorded 1,21,485 UD permissions in the first six months of FY23. It was 1,18,515 in the same period of FY22.

Industry insiders are blaming the situation on the Russia-Ukraine war that has caused a global supply chain disruption and triggered skyrocketing inflation, leaving economies in tatters.

In the first half of FY23, the apparel sector contributed 82.14 per cent or nearly $23 billion from the total export earnings. However, insiders claimed that they are receiving fewer export orders as buyers are taking more time to place them.

BGMEA President Faruque Hassan said, “We started last year with a tremendous volume of work orders and export growth. But due to the ongoing global economic crisis triggered by the Russia-Ukraine war, export orders have been declining since the second half of last year.

“Earnings were excellent through November and December. We think the exporters will have to face tougher situations in the coming months if the global economic situation does not change.”

Other major export sectors, such as jute and jute goods, home textiles, frozen and live fish, agriculture and chemical goods, also posted negative earnings during the first six months of FY23.

During the period, jute and jute goods sector earnings were down by 17.65 per cent to $486 million; home textile earnings dropped by 16.02 per cent to $601 million; frozen and live fish export earnings fell by 27.33 per cent to $246 million; and agriculture goods export earnings slipped by 23.26 per cent to $501 million, according to EPB data.

Insiders claimed that most sectors were recovering from the Covid-19 pandemic and started receiving a good number of orders since mid-2021. But after Russia invaded Ukraine, the situation worsened very quickly owing to the subsequent global
economic crisis.

Since September 2022, export orders started decreasing severely and they do not know when the crisis will come to an end, they said.

“Thousands of tonnes of raw jute are stuck in the traders’ warehouses. Millers also have hundreds of tonnes of finished or almost finished goods in their storages,” said Esrat Jahan Chowdhury, CEO of Tulika Eco and director of Bangladesh Jute Goods Exporters Association.

“We do not know what will happen in the future. Amid this situation, the government has increased gas and electricity prices. This will reduce our competitiveness in the global market,” she added.

LC opening down by 22.52%

From mid-2022, the country’s forex reserve started dwindling to an alarming level. That led the central bank to take some initiatives, including discouraging the import of luxury goods, increasing the LC margin up to 100 per cent, to reduce imports to save foreign
currency.

Thanks to those measures, LC openings have declined by 22.52 per cent year-on-year to $34.10 billion in the first half of FY23.

However, LC settlements have increased by 7.71 per cent to $41.37 billion during the same period.

The central bank has projected that the country’s imports will decline by 9 per cent at the end of FY23.