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Likely Implications of the Ongoing Global Financial Crisis for Bangladesh

Likely Implications of the Ongoing Global Financial Crisis for Bangladesh. Media Briefing by the World Bank November 26, 2008. Economy today. The current state of the Bangladesh economy is stable,. Economy (possibly) in the coming months.

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Likely Implications of the Ongoing Global Financial Crisis for Bangladesh

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  1. Likely Implications of the Ongoing Global Financial Crisis for Bangladesh Media Briefing by the World Bank November 26, 2008

  2. Economy today The current state of the Bangladesh economy is stable,

  3. Economy (possibly) in the coming months The current state of the Bangladesh economy is stable, but in view of the unfolding global financial crisis, the situation could deteriorate in as little as three months time!

  4. Three parts of this briefing • The economy today ~ what we know & what was projected before; • Ongoing global financial crisis; and • Likely impact on Bangladesh economy.

  5. Bangladesh: Economic Growth Source: Bangladesh Bureau of Statistics

  6. Structure of Economy Source: Bangladesh Bureau of Statistics

  7. Sectoral Growth Rates Source: Bangladesh Bureau of Statistics

  8. Foreign Exchange Reserves(in billion US$ & in months of import) Source: Bangladesh Bank & World Bank Staff Estimate

  9. Exchange Rate Source: Bangladesh Bank

  10. Foreign Direct Investment Source: Bangladesh Bank

  11. Export Source: Export Promotion Bureau

  12. Import Source: Bangladesh Bank

  13. Remittances Source: Bangladesh Bank

  14. Overseas Employment Growth Source: Bureau of Manpower, Employment & Training

  15. Remittances & Overseas Employment During FY05- FY08, remittances grew at a faster rate than growth in overseas employment, indicating that money remitted per worker has increased during the period.

  16. Current Account Balance Source: Bangladesh Bank

  17. 2. Ongoing Global Financial Crisis • Summer of 2007 • Sub-prime mortgage crisis • September 15, 2008 • US Investment firm Lehman Brothers files for bankruptcy

  18. Growth Forecasts Source: World Economic Outlook, IMF

  19. Trade Volume Source: World Economic Outlook, IMF

  20. Remittances Source: Migration and Development Brief, Development Prospects Group, The World Bank

  21. 3. Likely Impact on Bangladesh Economy Trade channel ~ export, import & remittance, which in turn will affect • Economic growth • Government finances: expenditure, revenue and fiscal deficit

  22. Exports • FY09 exports ~ projected to grow by 16.3% to US$ 16.4 billion. • First 3 months of FY09 ~ exports US$ 4.4 billion. To achieve the target, exports need to grow by 9% in the remaining 9 months of FY09. • Two post-impact scenarios for exports: • 5 % in 9 months ~ export earnings: $16 billion • 3 % in 9 months ~ export earnings: $15.7 billion.

  23. Remittances • FY09 projections ~ grow by 26.6% to $ 10 billion; additional 800,000 people will go abroad for work • First 3 months of FY09 ~ 213,000 people have left ~ 600,000 more need to go in the remainder of the fiscal year to meet the $10 billion target • Two post-impact scenarios: Not 600,000 more, but • 400,000; total remittance in FY09 is reduced to $9.2 billion • 300,000; total remittance in FY09 is reduced to $8.9 billion.

  24. Import • FY09 import projection: grow by 19.2% to $ 23.2 billion ~ falling commodity prices • First 2 months of FY09: goods worth $3.8 billion imported ~ to get to benchmark, import will need to grow by 16.2% for the remainder of the year • Two scenarios: Instead of growing by 16.2%, import will grow by • 10.3%: import bill reduced by $1 billion; • 13.2%; import bill reduced by $.5 billion.

  25. Benchmark & two possible scenarios Source: Bangladesh Bank, Bangladesh Bureau of Statistics, and World Bank Staff Estimates

  26. 1. Likely Impact on Economic Growth Source: Bangladesh Bureau of Statistics, and World Bank Staff Estimates

  27. 1. Likely Impact on Economic Growth Source: Bangladesh Bureau of Statistics, and World Bank Staff Estimates

  28. 2. Likely Impact on Balance of Payment Source: Bangladesh Bank, and World Bank Staff Estimates

  29. 3. Likely Impact on Government’s Budget Source: Ministry of Finance, and World Bank Staff Estimates

  30. Knowing what we know now & planning… • The global financial crisis has started affecting the real economies. All signs of a massive downturn in the global economy ~ developed and developing. • BD has been insulated from the financial crisis ~ lack of integration. • The crisis could easily come to our shores in the post-Christmas period!

  31. Knowing what we know now & planning… • Need to remain watchful ~ government and civil society! • Perhaps contingency planning including any possible government assistance need to be carefully thought out. • Extremely important to ensure the new elected government has the relevant briefing to be able to quickly move & take relevant policy actions.

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