Country’s economic recovery caught in stagnant int’l trade

The country's economic recovery is at a slow pace for several reasons, including stagnation in foreign trade due to recession in the world economy amid the pandemic, a Bangladesh Bank (BB) report has recently said.

Other reasons are instability in the price of fuel oil in the international market and the global trade war. As a result, there is a fear that the GDP is not growing at the desired rate.

The report titled “Annual Report 2019-20” of Bangladesh Bank was published on Tuesday.

The report paints an overall picture of the economy and business, including how the country's economy is progressing in tackling the pandemic effect, the global economic situation, the situation in the country's banking sector.

However, the hope is that the country's health sector problems and recovery are showing some signs of recovery but the post-epidemic economy is still at risk, the report said. 

Bangladesh is no exception to the pandemic effect. The second wave came amid the process of handling the first push of the coronavirus’ negative affect, which is also hampering the economic recovery.

According to the report, the incentive packages announced by the government have played a magical role in countering the negative effects of coronavirus and helping bring the country's trade and commerce back to normal.

The country's manufacturing sector has somewhat turned around. Due to the increase in the flow of money at the field level, it has become possible to maintain the purchasing power of the people. This is helping the economy turn around faster due the domestic market.

It added that economic recovery depends largely on the implementation of incentive packages. The report also hopes the government provided policy assistance will help bring growth back.

It said export earnings declined at the end of last fiscal year as the global economy stagnated due to the coronavirus effect. Later it is started to grow. The same is true on the import trade.

Remittance income in during the pandemic has continued to rise, which has helped keep consumer demand in the rural economy. Although the flow of credit to agriculture and rural informal sector has decreased, it has started increasing since October of the current financial year. If this trend continues, the rural economy will also turn around soon.

Reducing imports and increasing remittances have boosted foreign exchange earnings, the report said. As a result, foreign exchange reserves have increased. The amount has increased to 4,100 crore dollars, which is 25.6 percent more than the last fiscal year.

The supply of money to the market has been increased through incentive packages to counter the effects of coronavirus.

However, this will create additional pressure on inflation. Strict supervision must be taken to deal with this pressure so that the use of money outside the market is appropriate. At the same time, a balance has to be struck between production, demand and supply. Then the inflationary pressure will be much more tolerable.

In the budget of the current financial year, the inflation rate has been fixed at 5.4 percent. But Bangladesh Bank thinks that this rate may increase further at the end of the financial year.

In the current financial year, this rate may be between 5 to 5.9 percent. The impact of the coronavirus will put pressure on inflation in the next financial year as well. As a result, this rate may be between 5 to 5.9 percent in the next financial year.

However, the report noted that there is no pressure on inflation in the current production and supply system. Also, the price of the product in the international market is quite high.

ask/zn