Recession in Bangladesh economy likely

Once, Bangladesh was able to bring its economic growth over eight per cent. Amidst multiple challenges, Bangladesh did see impressive growth in economy. For the causes of achieving remarkable growth, Bangladesh came under a wide range of discussion in the world. On the way of advancing economically, coronavirus pandemic destroyed the growth trend. Despite trying to overcome post-pandemic challenges, there is little possibility of overcoming the challenges due to global crisis. Russia-Ukraine war puts the world in worrying situation. Bangladesh is no exception. Bangladesh also started to face critical moment in economy shortly after invasion by Russia.

As Bangladesh imports many ingredients including food grains from these two countries, more-than-expected import cost was paid. As a result of paying abnormal import cost, prices of essentials already went skyrocketing. Economic indicators were impacted much. Annual average rate of inflation reached 7.48 per cent in November, 2022. Besides, trade deficit crossed US$ 9.50 billion in the first four months of current fiscal year ( 2022-23). Current account deficit recorded US$ 4.50 billion in this period. Foreign exchange reserve also came down below $ 36 billion as of November of just concluded year. Though around one million people went abroad as remittance senders, Bangladesh did not see expected inflow of foreign remittance in 2022. In view of declining reserve volume, the government took decision of import restriction. Bangladeshi currency deprecation decision was another blow in economy. During FY 2022, BDT was deprecated around 9.2 per cent resulting in import expensive.

By the way, the banking sector came under notice of all for non-performing loans growing.

A turmoil situation in Bangladesh economy is prevailing following global crisis. The government in Bangladesh sought loans from the IMF amounting US$ 4.5 billion in tackling the situation. The loans amount is yet to approve. Bangladesh has become third country to seek IMF support next to Sri Lanka and Pakistan in South Asia. Bangladesh saw deteriorating situation in economy in 2022 in terms of macroeconomic indicators, no doubt. Is it possible to expect better economic performances in current year? In the face of global crisis, Bangladesh seldom achieves economic growth in current year.

Already Washington-based lender, the World Bank (WB) made grim projection for current fiscal year in the affairs of GDP growth rate. Bangladesh also came under the screening of the International Monetary Fund (IMF) recently on same affairs. In the beginning of new year, the WB came up with growth forecast report on South Asian economies. According to report published recently, Bangladesh to see a 5.2 per cent growth in GDP during current FY- down from a 7.2 per cent growth in previous FY. January 2023 forecast made by the WB did not make us worried due to global crisis. IMF in the October version of World Economic Outlook 2022 in its High inflation rate coupled with decreasing of household-level income and expenditure helped the WB to draft this projection. If the war continues for a longer period, GDP growth rate might come down.

Bangladesh was in a hurry in addressing economic problems caused by the war just after disappearing pandemic in just-concluded year. According to projections made by the WB and IMF, Bangladesh economy might have experienced recession caused by rising of inflation rate. Recession is a situation when prolonged downturn in economic activity is widely observed in an economy. During recession in economy, economic output, employment and consumers spending are sharply dropped. Recently, the World Bank warned of global recession in 2023 backed by elevated inflation with slow economic growth.

According to the WB report released recently, the global economy is projected to grow by 1.7 per cent in 2023 and 2.7 per cent in 2024. Among global economies, Bangladesh falls in South Asia region. The Washington-based development financier identified inflation as the reason of dampening GDP growth in Bangladesh. According to Bangladesh Bureau of Statistics (BBS), point-to-point inflation recorded 8.71 per cent in December, 2022. The World Economic Forum (WEF) in its ‘Global Risks Report 2023’ said that Bangladesh economy is affected with inflation, debt and commodity-price shocks. The report presents the list of 32 global risks and definitions adopted in the Global Risks Perception Survey 2022-2023.

The consumers in Bangladesh are losing purchasing power capacity for the cause of declining real income supported by high inflation. In GDP, consumers’ expenditure is considered as big contribution next to investment and government expenditure. It is essential to note that Bangladesh, during economic crisis ( 2007-2009), saw 5.5 per cent GDP growth. During the period under review, the average GDP growth rate in the world was 0.4 per cent. During coronavirus, GDP growth in Bangladesh was positive. Bangladesh saw around 3.4 per cent GDP growth whereas India saw negative -6.6 per cent and the world experienced -3.3 per cent. Despite seeing negative GDP growth worldwide, Bangladesh survived anyhow. How could Bangladesh hold positive output in economy during pandemic amidst increased poverty and unemployment rate? The pandemic moment saw significant volume of foreign remittance sent by the Bangladeshi expatriates. With over US$ 48 billion foreign exchange reserve, Bangladesh was able to manage virus-hit economy.

US-based Boston Consulting Group ( BCG) praised Bangladesh economy in many fronts. According to BCG report, Bangladesh is on the way of becoming a trillion-dollar economy. If below 5 per cent economic growth is seen, Bangladesh will achieve the milestone of one trillion-dollar economy by 2040. A 10 per cent growth makes sure one trillion-dollar economy by 2030. Some peer economies like Vietnam, Indonesia, Thailand, India lag behind Bangladesh in respect of economic performances. Bangladesh now keep enormous capacity to face any untoward situation in economy. If significant volume of returns from mega projects come, the economy is likely to surpass some developed economies. No worry for Bangladesh despite global recession appears soon. Hopefully, Bangladesh is ready to fight against economic recession.

The writer is an economic affairs analyst. He can be reached at mazadul1985@gmail.com