Despite the recovery trend in the economy, Bangladesh will have to face emerging challenges due to recent price rise of essential commodities, decreasing remittances, any new Covid wave, and slow vaccine rollout, a recent report has found.
The findings were disclosed in the Review of Economic Situation in Bangladesh for July-September 2021 (Q1 of FY22), prepared by Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI), on Thursday.
The report said Bangladesh’s economy has been showing some signs of recovery in Q1 of FY22 as stimulus packages from the government comforted the business groups, from large farms to petty micro-enterprises, which eventually helped the economy to boost again.
“Exports and imports are two important drivers of the economy, and amid the Covid-19 pandemic, both the areas have done well. Robust export earnings have facilitated economic recovery in the recent time. The rate of inflation is also increased in the quarter under review,” the report found.
The inward remittances however decreased, which has multiplier effects on other economic sectors, especially the small and medium industry.
The inflow of remittance in July-September of FY22 decreased significantly by 19.45 per cent to US$5.41 billion from US$6.71 billion in the corresponding months of the previous fiscal year, as many Bangladeshi migrants lost their jobs, some migrants were laid off by their companies during the second wave of Covid-19 pandemic.
“In the last month of the quarter (September 2021), year-on-year, remittances dropped further by 19.76 per cent to US$1.73 billion from US$2.15 billion. Also September’s remittances decreased month-on-month by 4.42 per cent from US$1.81 billion (August 2021). According to experts, higher gap in exchange rate of the US dollar against the local currency between formal banking channel and kerb market has encouraged illegal ‘hundi’ activities in recent months,” the report mentioned.
The report said the country’s foreign currency reserve remains at a satisfactory position and the exchange rate has long been remained stable.
On the other side, the report found that some of the economic indicators appear to be less promising than projected earlier.
“The fiscal framework continues to be weak in view of poor achievements, more specifically, both in terms of revenue mobilization and public expenditure,” it said.
The report also noted that the surging prices of building materials has been threatening the construction sector, with rod prices hitting a record high, as the economy is crawling back to normalcy amid the coronavirus pandemic.
“People are struggling to continue construction. An analysis showed that rod prices have shot up by around 38 per cent in last 10 months. The rates of increase in the prices of brick, sand, stone, cement, glass, aluminium, pipe, indoor fittings and other materials during this period are between 10-20 per cent,” the report said.
“In spite of the tremendous potential of the construction and the real estate sector, factors like land value distortion, and absence of secondary property market, asset securitization and sale of mortgages, and backward linkage industries such as cement, ceramic, brick manufacturing, etc. adversely affected its development,” it added.
The report also mentioned that unemployment situation and low investment also remain a challenge for Bangladesh. It also suggested a significant increase in public and private investment is necessary to maintain competitiveness and generate further growth.
