Sluggish export growth

Bangladesh's export grew only by 5.9% in FY12, compared to 40.5% in FY11. So, it missed the government's target (16.0% over FY11). In fact, year-on-year export growths in the last 4 months of FY (starting in March 2012) were negative (-7.2%, -7.1%, -4.2%, and -3.1%).

As economic crisis has been taking place in US and Europe, the demand for Bangladeshi products from those economies remained low. Moreover, production costs increased significantly due to higher energy prices including electricity and higher banks' interest rate.

It seems, Bangladesh's export fell into a growth trap (picture below). Since FY04, the export growth rate were never able to cross the mark of the previous year. In fact, the trend of export growth since FY06 has been falling. So, the policymakers need to work more, especially those who think themselves as trade expert.

News link on export growth.

GDP growth and Inflation relationship

Well, Policy Research Institute (PRI) of Bangladesh conducted a research lead by Dr Sadiq Ahmed  mainly on the relationship between GDP growth and inflation in the context of Bangladesh.

Here is the news link on the issue.

What did the study find then?

1. There is a long-run negative relationship between GDP and inflation;
2. While seeking a threshold of inflation in Bangladesh, it finds that a 4.0%-5.0% inflation rate is the threshold to provide the flexibility of resource mobility for growth in Bangladesh (against the central bank's official claim of having a inflation threshold of 6.0%-8.0%).

What's new in this study?

Nothing significant. A Working Paper (WP0604: Inflation and Economic Growth in Bangladesh: 1981-2005) of the Policy Analysis Unit (PAU), Bangladesh Bank has done the similar approach back in 2005. What are the results of that study?

1. There exists a statistically significant long-run negative relationship between inflation and economic growth for Bangladesh;
2. The estimated threshold model suggests 6.0% as the threshold level (i.e., structural break point) of inflation above which inflation adversely affects economic growth.

FYI: Link of the WP0604 (Bangladesh Bank website-publications-research work-working papers).

It's not clear whether both the attempts (Bangladesh Bank and PRI) recognized the very first and previous attempt (PAU) in this area of economic research in Bangladesh.

Inflation exceeded projection!

Average annual rate of inflation in FY12: 10.6%, the highest average inflation rate after 1985!

According to the government’s projection, average annual rate of inflation in FY12: 7.5%, meaning 3.1% higher than projection.

News on the issue.

Consolidating and Accelerating Exports in BD

World Bank publishes a report 'Consolidating and Accelerating Exports in Bangladesh' written by Md. Abul Basher et al. The following issues came up in the report: 

Bangladesh not only needs to consolidate existing strengths in basic garments, but also plan for the future.

While garments will continue to dominate exports, encouraging diversification will help guard against shocks and maintain export growth in the longer term.

Export growth can accelerate, provided critical bottlenecks are addressed, including trade logistics, skill shortages, and compliance with Government labor standards. 

Link of the report.

Economic performance below expectation!

The Financial Express publishes a report on the performance of major macroeconomic indicators in FY12 and finds that most of the indicators performed below expectations. 

Here is the link of the report.   

Budget and its relation with IMF fund

Professor M.A. Taslim writes on the FY2013 budget announced by the government and tries to relate the content of the budget with conditionalities of IMF set for its $1.0 billion fund for Bangladesh.

Here is the link.

Garment orders fall...

Garment orders fall, especially from debt-affected Eurozone, as the cautious EU buyers are deferring or placing reduced number of orders due to a prolonged debt crisis there. Apart from a demand drop, the buyers are also offering lower prices. 


The news link on the issue. 

Arguments against new banks...

Professor M.A. Taslim writes against Bangladesh Bank's note supporting new banks. Finally, one macroeconomist speaks out on this issues; lets forget about the motive, but concentrate on the logic that he provided.

Here is the link.

India: An alternate export destination?

The Wall Street Journal reveals that the government of Bangladesh really expects increased exports to India to make up for slack demand from Europe and the U.S. for its textile output in the year ahead, as Finance Minister M.A. Muhith says. 


Is it possible? 


Here is the article from the Wall Street Journal.

Dismal export performance!

Exports fell for the third straight month in May due to a plunged demand for RMG items from debt-crisis-affected Eurozone, On a year-in-year basis, export declined by 4.1% in May. However, exports grew by only 7.0% during July-May FY2012 to $21.98 billion, 7.5% lower than the periodic target for the same period.

Question: Is the government still hoping to achieve the preliminary estimates of 6.3% GDP growth with this dismal export performance given the fact the performance of overall industry sector and service sector is largely dependent on export performance?

Link of the news. 

CPD's analysis on budget

Centre for Policy Dialogue (CPD) responses to the National Budget for Fiscal Year 2012-2013, proposed by M.A. Muhith, the Finance Minister.

Link of the initial report.

Budget for FY2012-2013

Finance Minister A. M .A. Muhith proposed a new budget for FY2012-2013 yesterday in the parliament. The following link is related with budget announcement and for your information only.

Link for Budget documents

Bangladesh Economic Update, World Bank (May 2012)

World Bank, Dhaka Office publishes its Bangladesh Economic Update (May 2012) using latest government statistics of GDP growth and others. It talks on ongoing macroeconomic challenges such as inflationary pressures, higher fiscal deficit and strained balance of payment situation.

Link of the report.    

Finance & Development, IMF (June 2012)

IMF publishes its June 2012 edition of Finance & Development with some wonderful articles.

Link of the publication.

Qatar's investment plan with BB

The government of Qatar proposed to invest its currency worth of $1.8 billion in the Bangladesh Bank (BB). If the proposal is accepted, it would be another milestone in the area of financial management of BB.

Link of the news.

Certain issues need to be considered before any decision:

• Though it is going to increase BB's foreign reserves level, however it should be considered as the liability of the central bank (debt burden);
• The agreement should include guaranteed clause for pay-back and repatriation clause should be clearly defined;
• Interest rate, if any, should be market based and internationally comparable;
• Profit-sharing (or, loss-sharing) clauses should be clearly defined;
• Long-run investment should be considered for using this amount, no short-run (like Quick-rental power plant)