Global Economic Recession and Its Impact On Bangladesh

GLOBAL ECONOMIC RECESSION AND ITS IMPACT ON BANGLADESH
“Bangladesh is a victim of global economic crisis.”

– Dr. Atiur Rahman, Economist and former Governor, Bangladesh Bank.
One crisis ends and another begins, each one is seemingly bigger than the last. Now the threat of global recession looms
over the world. Dread and anxiety over the possibility of a global recession are rising around the world right now.
What is Recession?
In 1974, US economist Julius Shiskin described a recession as “two consecutive quarters of declining growth” and many
countries still adhere to that. According to United States’ National Bureau of Economic Research (NBER), “Economic
recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally
visible in production, employment, real income, and other indicators. A recession begins when the economy reaches a peak
of activity and ends when the economy reaches its trough.”
The world economy has gone through four major downturns over the past seven decades, in 1975, 1982, 1991 and 2009.
‘Recessions typically last for about a year in advanced economies’- according to the IMF.
Present Situation of Global Economic Recession:
The global outlook has deteriorated markedly throughout 2022 amid high inflation, aggressive monetary tightening, and
uncertainties from both the war in Ukraine and the lingering pandemic. While the baseline forecast for 2023 is highly
uncertain, most forward-looking indicators suggest a further slowdown in global growth.
Causes of Global Economic Recession:
 Covid 19 crisis
 Russia-Ukraine war
 Israel–Hamas war [ ‘Wider War in Middle East Could Tip the World Economy Into Recession”-Bloomberg]
 Supply chain crisis
 Yemen (Houthi) attacks, Brand boycotts
 Loss of confidence in investment and the economy
 High interest rates
 A stock market crash
 Manufacturing orders slow down
 Deregulation
 Poor management
 Deflation
 Fuel crisis
Recent Global Financial Crisis:
1. The world’s largest economies are facing sharp growth slowdowns.
2. Prospects for developing countries are weakening amid multiple challenges.
3. A global food crisis is hitting many developing countries.
4. Central banks are changing course: Surging inflation prompts aggressive monetary tightening.
5. Rising borrowing costs and worsening liquidity conditions hit developing countries.
6. Tightening fiscal space in developing countries: between a rock and a hard place.
7. The global energy crisis.
8. The looming debt crisis in developing countries, etc.
While global economy was recovering strongly from the COVID-19 pandemic, the war in Ukraine posed a setback to the
ongoing recovery. International organizations revised their forecasts for economic growth prospects and inflations. These
are….
Page 1 of 4
Source: IMF
Impact of Global Economic Recession on the Economy of Bangladesh:
“Global growth is slowing sharply, with further slowing likely as more countries fall into recession. My deep concern
is that these trends will persist, with long-lasting consequences that are devastating for people in emerging market
and developing economies,” - World Bank Group Ex-President David Malpass.
The double disruption i.e. Covid-19 and Russia-Ukraine conflict has caused a massive losses for the global supply chain
and economic stability for all countries including Bangladesh.
Source: IMF [ আনু মাননক সরলীকৃত নিগার ড্র করর নিরলই হরে। যা েুঝারত চান সসটা েুঝারত পাররলই চলরে। ]
According to the most of the Bangladeshi Economists “Bangladesh is now facing an "economic crisis" that will not
be over soon as the global economy is also going through turmoil.”
Page 2 of 4
1. GDP Growth: The GDP will decrease due to the global crisis induced by the Russian invasion of Ukraine. However, the
growth may increase by 1 per cent to 6.2 per cent in the next fiscal, said a report of World Bank (WB).
2. Decrease in Per Capita GDP and Per Capita Income 3. Inflation, 4. Expenditure Budget
5. External Debt: “External debt in Bangladesh reached $100.6 billion” The Daily Star, March-2024. According to
Debapriya Bhattacharya, distinguished fellow at CPD and convener of the Citizen’s Platform for SDGs, “Bangladesh
may face major shocks in 2024 and 2026 in regards to its foreign debt repayment of 20 major mega projects.” This
amounts to around $43 billion owed mostly to Russia, Japan, and China.
6. Export and Import:
7. Trade Deficit
8. Foreign Exchange Reserve:
Source: Bangladesh Bank

9. Exchange rate of Taka: Though the country's forex reserve decreased during this time, it failed to keep the exchange
rate under control. The value of the Bangladeshi taka has fallen by over 25 percent against the U.S. dollar over the past six
months.
Time Period Value of Taka (Against 1 US dollar)
Jan-22 86 Tk
Jan-23 106.34 Tk
March-2024 110.00 Tk
10. Decrease in Remittance:
At the same time, inward remittance has also fallen, depleting foreign reserves.
11. Money Laundering: Bangladesh is listed as one of the 30 leading money laundering countries in the world. Some
analysts describe this problem as the cancer of its economy. A recent report of the Swiss National Bank (SNB) says that
“the amount of money deposited by Bangladeshis in various banks in Switzerland stood at 871.1 million Swiss francs”
(around $916.92 million)
Page 3 of 4
12. The price hike
13. Ukraine war threatens food security of Bangladesh:As the Russia-Ukraine crisis continues to disrupt the global trade
of key food items such as wheat and vegetable oils, along with fertilisers, impacts are falling heavily on countries such as
Bangladesh. Dependent on imports of those items to feed its large population the country faces the prospect of rising food
insecurity.
14. Disrupt trade with Russia
15. Fuel Crisis:
The gas and oil crises created by the Russia-Ukraine war is also hurting Bangladesh
The IMF chief Kristalina Georgieva has warned in last May that “Possibly the 2023 is going to be even tougher”.
However, Bangladesh has almost overcome from covid pandemic but it has got massive shock of changing global economic
situation especially after Russia Ukraine war.
Steps taken by Government to deal with the crisis: The government of Bangladesh has adopted a conservative approach
to deal with any upcoming potential crisis.
 Bangladesh has sought a $4.5 billion loan from the IMF for its balance of payment and budgetary needs
 Further talks are in progress with World Bank, JICA and with ADB for budget assistance of USD 1.00 billion.
 To save dollars and to increase foreign currency reserves, the government has restricted civil servants' foreign tours,
 Has imposed higher import tax on luxury items, relaxed restrictions to draw in remittances,
 Has boosted exports, and introduced austerity measures in power expenditure.
 Government has reduced the use of electricity.
 Government has been careful to not take up projects without a high economic and social rate.
Although these don't seem to be the long-term solution to economic woes, it's expected to save huge money, positively
influencing macro-economic stability.
Recommendations:
 The government should enhance the monitoring on imports to protect the forex reserves, and tackling money
laundering should be given emphasis
 We may encourage sectoral measures such as the rise in domestic production in order to reduce the dependence on
the global commodity market.
 Bangladesh should target both stabilizing the forex market and undertaking reform measures responsible for
weakening the forex reserves. This is mainly related to the energy market where medium to long-term reform
measures are essential.
 Bangladesh needs to undertake long-term reform measures such as subsidy management, withdraw capacity
payment for power production, develop clean energy, and ensure market-based operation in exchange rate and
interest rate.
 Good governance must be ensured in banks, withdrawing the lending interest rate cap of 9 percent and managing
foreign loans from different sources to keep the reserves afloat.
 The central bank should increase the interest rate on loans to control the money supply to the market.
 To check the declining trend of the ongoing foreign reserves, the government should borrow from the Islamic
Development Bank, International Monetary Fund and World Bank and foreign nations.
 Exporting human resources should be given priority to get back the tempo of remittances.
 Government should reduce public expenditure, etc.
Concluding Remark
“The collective economic stability Bangladesh acquired over the past one and a half decades is under huge pressure
due to the global financial unease.” – Dr. Selim Raihan, Executive Director at research organization SANEM
There is no denying the fact that the recent global economic crisis has profound implications for the developing countries
like Bangladesh. Therefore, there is a need for the policy makers to take necessary pragmatic steps to overcome the breathe
situation as early as possible.
Page 4 of 4

Global Economic Recession and Its Impact On Bangladesh

Uploaded by

Copyright:

Available Formats

Global Economic Recession and Its Impact On Bangladesh

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Global Economic Recession and Its Impact On Bangladesh

Uploaded by

Copyright:

Available Formats

GLOBAL ECONOMIC RECESSION AND ITS IMPACT ON BANGLADESH

“Bangladesh is a victim of global economic crisis.”

Source: Bangladesh Bank

You might also like