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Reviewing the impacts of global economic turmoil

Bangladesh Economic Association to offer some solutions

Asjadul Kibria
THE global economy is in turmoil again. Many apprehend that 2012 will be the worst year since the global financial crisis of 2008-09.
The eurozone has reentered recession. The US economy is not picking up. BRICS nations have lost the momentum of high growth. Growth during the April-June quarter in China is the lowest in three years.
In fact, spillover from European sovereign debt crisis became a very big threat for the global economic stability. Originated in Greece, the crisis has already moved to some other countries termed as 'peripheral sovereigns' and is now threatening the 'core countries' like Germany and France.
Government spending in the US is abruptly falling due to the inability of the US Congress to pass budget and is already causing substantial decline in growth. The US, along with other advanced countries, is also trapped in ballooning unemployment.
Demand in the rich west — the United States and the European Union — is likely to be weak for a prolonged period and may deal a big blow to our exports in the current year as these are the two major markets of Bangladeshi products. Export growth is declining and the annual target was not achieved last fiscal year (fiscal 2012). In July, the first month of fiscal 2013, exports registered only a 4.26 percent growth.
In fact, our economy is facing headwinds from the European debt crisis and global slowdown. The global financial crisis and European sovereign debt situation have slowed the pace of global trade. The International Monetary Fund projects growth of global trade at 3.8 percent in 2012, down from 5.9 percent in 2011.
The Middle East countries and the West Asia are also in turbulence due to recolonisation of Libya and a violent domestic
war in Syria. Iran nuclear crisis aggravated the situation as the Western countries tighten economic sanctions.
Remittance inflow is also not robust as growth was 10.24 percent in fiscal 2012. The existing manpower export destinations are shrinking as thousands of Bangladeshi workers came back from Libya last year. Saudi Arabia, the largest destination, is not renewing permission for the existing workers and also not allowing new workers. The issue with Malaysia is yet to be resolved.
The global commodity market has also turned volatile. The US drought is a key risk for global food inflation. Another round of food crisis will be there soon like 2008-09. This will increase the cost of food import for net food importing countries like Bangladesh.
The prices of industrial raw materials and intermediate goods are also showing an upward curve, after being stable for a long time.
Against this backdrop, the future of Bangladesh's economy also appears bleak. Already troubled by internal policy mismanagement, the external sector is going through tough times.
Globalisation has extracted its costs now. Thus a comprehensive review of the global economic trend and its impact on the development journey of Bangladesh is an urge of time. To respond to the urge, Bangladesh Economic Association (BEA) has set its biannual conference's theme — Global Economy and Vision-2021.
The three-day conference will be held on September 13-15 at the Bangladesh Engineers' Institution auditorium.
Prof Abul Barkat, president of the association, said: "The Vision-2021 is our development philosophy originated domestically to elevate Bangladesh to the level of a midincome country from the current status of a least developed country."
But the realisation and achievement of the vision is not possible without a comprehensive work process, he said.
"It is also not possible only relying on the strength of the internal sector. The stability of the external sector is very important to move ahead. In fact, Bangladesh economy is gradually more integrating with the global economy and movement of global economy has both positive and negative impact on us."
In this context, the BEA has decided to review the ongoing turmoil of the global economy and its impact on achieving the Vision-2021.
Barkat said when the vision was designed, several important challenges were also identified.
"Three years have passed and several steps have also been taken to accelerate our development process," he said. "Still, some important steps have not been taken to overcome some of the crucial challenges. For example, many commissions have been formed except land commission. Reforms in agriculture land, water body and khash land do not get any momentum.
You can't expect to achieve goals of development without properly addressing the land reform issue. So, on one hand, some big challenges are yet to be addressed, and on the other hand, challenges of the external sector become more difficult to address. "
So, it is the right time for the economists to review and analyse different aspects of the global economy, Barkat said.
According to Barkat, who is also a professor of economics at Dhaka University, the gravity of global economy is gradually shifting towards Asia from Europe and North America. This shift has created both challenges and opportunities for Bangladesh. "This requires proper policy steps so that we can tap the potential."
Barkat said the moves to support industrialisation are facing impediments due to some policy drawbacks.
"The government's huge borrowing from the banking sector has crowd-out effects for the private sector. Despite an increase in agriculture output, the government imports food. Thus policy adjustment according to development priority is a must."
The BEA president said there will be some thought-provoking ideas to be floated in different sessions of the conference.
"We have received 90 papers from economists, policymakers, bankers, analysts and students. Some papers will critically review the global economy and some papers will focus on internal challenges of our economy."
There will be some logical suggestions and guidelines to overcome the challenges, he said.
"We are expecting that the conference will be able to provide some recommendations to reset some strategies to achieve the Vision-2021."
Regarding the activities of the association, Barkat said they have successfully introduced Dhaka School of Economics as an affiliated institution of the University of Dhaka.
" It was a long due and we have finally done the work," he added. Barkat has served the association as its general secretary for three consecutive terms and is now completing his first term as the president of the association.
The writer is the business page editor of Prothom Alo and can be reached at asjadulk@gmail.com.