Dhaka, Bangladesh (BBN)- The central bank of Bangladesh sees the ongoing global meltdown is still big challenge for the economy that may hit the export growth, the flow of remittances and foreign fund inflow.
Although the Bangladesh economy has remained somewhat unaffected from the global recession, significant downside risks remain especially relating to the country’s exposure to real economy effects of the financial crisis through exports, remittances, and foreign capital inflow channels, the central bank said.
“The continuing slowdown of global growth, especially growth in advanced economies, may pose a big challenge for our economy if it persists for long,” Economic Advisor of the Bangladesh Bank (BB), the country’s central bank, Habibullah Bahar told BBN in the capital, Dhaka on Thursday.
The exports of traditional items like jute, jute goods, handicrafts, electronics, frozen food, leather and ceramic products including some primary commodities and engineering products declined significantly during the last six months, according to the Bangladesh Bank Quarterly (BBQ) for January-March 2009, released on Wednesday.
“It is apprehended that export of readymade garment (RMG) products could also slowdown in the near future,” the BBQ said, adding that it would be critical for the RMG sector to ensure smooth and production friendly environment and uninterrupted access to power and other inputs to retain competitiveness.
“In view of the likely reduction in trade volume, inflow of workers’ remittances, and foreign capital inflows, the Bangladesh economy would probably face several challenges in the near to medium term,” the BB noted.
Regarding the inflow of remittances, the BBQ said two distinct features of remittance inflows make the remittance issue more vulnerable.
Firstly, since most of the remittance earners are unskilled or low-skilled workers from the rural areas, any adverse impact on remittance inflows would affect the livelihood of a significant number of poor and vulnerable households.
Secondly, the fall in oil prices might wipe out the windfall gains resulting in interruption of the massive programs of modernization and infrastructure buildup in the oil rich countries creating adverse consequences on new recruitments in the near future.
“… Bangladesh’s policy priority should be to resolve the hurdles facing expatriate workers at home and abroad and explore new markets especially for skilled technical and service workers,” the BB noted.
The BBQ said it also needs careful monitoring as well to facilitate introduction of needed adjustments and corrections to meet the dynamic changes.
Besides, infrastructural facilities including gas and power should be improved to attract more foreign direct investment (FDI) as well as local investment, the economic advisor added.
BBN/SS/SI/AD-04June09-11:59 pm (BST)