Unnayan Onneshan’s monthly Bangladesh Economic Update (February 2018)

DHAKA, March 4 (NsNewsWire) — Monumental increase in import payment together with low export growth amid no possibility
of revival of the generalized system of preferences (GSP) has caused enormous current account
deficit, which is highest in the last decade.
Moreover, recent hike in oil price and high import of consumer goods are likely to result in an
upsurge of food inflation adversely affecting standard of living of the low-income people.

The Unnayan Onneshan (UO), an independent multidisciplinary think-tank, in its monthly
publication of the ‘Bangladesh Economic Update’ February 2018, fears so.
Taking account of the increasing trend in inflation rate and recent upsurge in oil price, the
research organization projects that at the end of the current fiscal year, food inflation is likely
to stand at 8.34 percent in the absence of immediate price stabilization measures.
Such increase in price in the commodity market coupled with reduced production of food
grains, decline in real wage, and lack of employment opportunities is likely to adversely affect
people’s standard of living on the one hand and threaten overall food security in the country,
comments the research organization.
Urging for the expansion of country’s productive capacities that enhance utilization of available
resources through efficient entrepreneurial capabilities and increased production linkages, the
UO recommends adoption of measures to stabilize price in the short run and strategies to
foster employment augmenting growth in the long run.
Referring to the monumental increase in opening and settlement of Letter of Credits (LCs) for
the consumer goods and consequential price hike in recent time, the think tank evinces that
during the period of July-December 2017, fresh opening and settlement of LCs increased by
56.35 percent and 60.47 percent respectively compared to the July-December 2016.
Twelve-month average food and general inflation stood at 7.17 percent and 5.70 percent
respectively in December 2017 compared to 4.51 percent and 5.52 percent in December 2016.
On point-to- point basis, food and general inflation increased from 5.38 percent and 5.03
percent in December 2016 to 7.13 percent and 5.83 percent respectively in December 2017.
Compared to the target of export earnings of USD 21373 million for July-January 2017-18, the
actual earnings fell short by USD 48.13 million, signalling the failure in achieving export target
at the end of the fiscal year. In addition, a declining trend in cumulative export growth has been
observed since the beginning of the current fiscal year, posing challenges to external balance.
Since the suspension of generalized system of preferences (GSP) facility for Bangladesh in June
2013 by the US, which is the country’s single largest export destination, export growth
considerably declined from 11.69 percent in FY 2013-14 to 3.39 percent in FY 2014-15. Despite
the increase to 9.77 percent in FY 2015-16, export growth plunged to 1.72 percent in FY 2016-17.
Failure to restore the GSP facility may further hinder the country’s export, fears the UO.
Rise in import payables along with shortfall in the primary income and income from the
services, the current account balance exhibits a deficit of USD 4767 million during July-
December of 2017 compared to a deficit of only USD 543 million during the corresponding
period of 2016.
As a consequence, the total balance of payment undergoes a deficit of USD 354 million in July-
December of FY 2017-18 compared to a surplus of USD 2265 million in July-December of FY
2016-17. Press Release