Protifolon Issue 1

Interview

The phase of being indifferent and complacent is over. From the indications that we are receiving from the exporters, from the migrant workers, and also from the production sectors, we think that there are signs of some slowdown. It would be smart for us to take some steps in order to address the emerging concerns.

Dr. Mustafizur Rahman
Executive Director, CPD

Impact on migration and remittance

Bangladesh is the fifth highest remittance-earning country in the world and is the second largest sector in the country which is integrated with the world economy. About 1.7 million workers left Bangladesh in search of jobs during 2007 and 2008 and about five million Bangladeshis are currently working abroad, mainly in Saudi Arabia, Kuwait and Malaysia.

In 2009, it is predicted that the number of workers going abroad will be significantly lower with UAE, Saudi Arabia, Malaysia and Singapore already struggling with slow economic growth and declining demand for construction and other services [CPD and ILO, 2009]. Overall remittances during 2008 were 37.3% higher than the previous year but since August 2008 they showed a decreasing trend as did the number of workers travelling overseas [Bangladesh Bank, 2009].

Impact on Trade

The health of Bangladesh’s economy depends significantly on foreign trade. Almost 90% of exports are targeted to United States, European Union and other developed countries. Rising unemployment, the subsequent decline in disposable income and declining consumer confidence in these markets could have serious impacts on export potential. Although exports showed robust growth (19.4%) during July-December 2008, they registered negative growth (-1.4%) during October- December 2008, (Bangladesh Bank, 2009) – the worst figures in recent history. All other sectors also registered negative growth during this period. The World Bank forecasted that due to slower activity in the export sector services growth will fall to the range of 5.8% to 6.7% in FY2008.

Impact of global financial crisis on the economy of Bangladesh

Since the collapse of the United States sub prime mortgage market and the subsequent international global crisis, many developed and developing countries have been plunged into deep recession. Bangladesh though has found itself in a slightly different position. Its economy is not so dependent on international capital and foreign investment, which has helped to lower the immediate impact of the crisis.

Despite this the Bangladesh government has formed a high-level technical committee and taskforce to monitor and advise on the crisis, and ministries and financial institutions have taken several precautionary measures. Importantly in October 2008 Bangladesh Bank withdrew 90 % of its total investment from foreign banks which has helped to further shield the economy, so that it is only now that the affects of the crisis are being felt.
Additionally the Bank has taken measures to stabilise the exchange rate, provide extra liquidity to the financial sector and raised the limit on private foreign borrowing. It has also relaxed the conditions for opening fresh letters of credit (L/Cs).