Reserves may drop by 2.48% in Mar: MCCI

Bangladesh will have to take quick actions to stabilise foreign exchange reserves as well as address the economic fallout, said Metropolitan Chamber of Commerce and Industry (MCCI) projecting a 2.48 per cent decline in reserves in March.

The leading trade body also expressed the hope that inflation will ease in the coming months while export earnings will rise.   

Foreign exchange reserves are projected to decline to $33.12 billion in March from $33.96 billion in February due to Asian Clearing Union (ACU) payment.

So, the chamber urged the government to take necessary actions to keep reserves stable and control inflation, enhance revenue earnings, ensure smooth electricity and gas supply for carrying out the economic activities.

However, it projected that exports and remittance earnings will increase in March this year comparing to February while import payments will show an upward trend amid the government’s various tightened measures. 

According to the MCCI review published on Tuesday, Bangladesh’s exports will increase to $5.28 billion in March from $5.23 billion in February and remittances will increase to $2.07 billion in March from $1.9 billion in February.

The organisation projects that the country’s imports will increase to $6.25 billion in March from $6.18 billion in February.

The chamber has made its own projections on some selected economic indicators for the third quarter (January-March) of the current fiscal year (Q3 of FY23).

The MCCI said the government should take immediate and decisive measures to address the economic fallout to overcome the pressure. The trade body also called upon the government to take steps for extending social safety net programmes.

Bangladesh’s robust economic recovery from the COVID-19 pandemic has been interrupted by Russia-Ukraine war, supply-chain disruptions, global oil and food price hikes, slowdown in external demand, weak remittance inflow, rise in inflation, negative current account balance, depreciation of Taka and a decline in foreign exchange reserves.

However, in the quarter under review (Q2 of FY23), the economy has been showing some signs of recovery. Export earnings have facilitated the economic recovery. The export-oriented garment, leather, plastic, jute and domestic market-oriented steel, food-processing and transport sectors are running in full swing.

The MCCI observed that the overall inflation in August rose to 9.52 per cent. Then it was gradually decreasing, and reached 8.71 per cent in December 2022. The exchange rate has long remained stable but depreciated notably in December 2022 in terms of US dollar.

Industry

Due to the COVID-19 pandemic and Russia-Ukraine war, the sector registered a lower growth of 9.86 per cent in FY22, which was 10.29 per cent in FY21. Besides, the share of the industry sector in GDP increased by 0.91 percentage points to 36.92 per cent in FY22 from 36.01 per cent in FY21.

Power

On 31 December 2022, Bangladesh Power Development Board (BPDB) had power plants with installed capacity to generate 22,608 megawatt (MW) and derated/present capacity of 21,826 MW. But the primary fuel (natural gas, oil and coal) shortages compel BPDB to restrict power generation.

According to the BPDB website, the power plants generate (evening, actual) 9,581 MW of electricity against a demand for 9,135 MW at substation end (evening peak) on 31 December 2022. During the quarter under review, the maximum generation was 12,773 MW recorded on 01 October 2022.

Price Situation

Monthly inflation dropped further to 8.71 per cent in December 2022 after reaching its peak at 9.52 per cent in August 2022 and 8.85 per cent in November 2022, under sobering impact of slowly improving global supply system and prices of food items, especially that of vegetables, easing marginally. Earlier, the point-to-point inflation was the highest at 11.40 per cent in 2011. A year ago in December 2021, the inflation rate was at 6.05 per cent.

Food inflation, however, decreased further by 0.23 percentage points to 7.91 per cent in December 2022 from 8.14 per cent in the previous month (November 2022). Year-on-year, food inflation was lower at 5.46 per cent in December 2021. On the other hand, non-food price inflation also decreased slightly by 0.02 percentage points to 9.96 per cent in December 2022 from 9.98 per cent in the previous month. Year-on-year, non-food price inflation was lower at 7.00 per cent in December 2021.