ICCB warns of recessionary risks, urges careful fiscal, monetary steps
Bangladesh needs to apply careful fiscal and monetary measures to diversify exports, increase remittance inflow and reform the financial sector to tide over recessionary pressures stemming from the global growth slowdown, says the International Chamber of Commerce-Bangladesh (ICCB).
It has called for a credible medium-term fiscal plan to provide targeted relief to vulnerable households and effective policy coordination to increase food and energy supply.
"Although Bangladesh may not go into recession, the country is significantly prone to many of the recessionary risks if appropriate steps are not taken to diversify the export product and basket, increase remittances through formal channels, streamline public sector expenditures, rationalise mega infrastructure and other projects and undertake effective financial sector reforms," the trade body states in its latest bulletin released yesterday.
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Referring to gloomy global outlooks, the ICCB says the three main global growth engines – the US, Europe and China – will experience slower growth in 2023. Higher-than-expected and persistent inflation, tightened financial conditions, Russia's war against Ukraine, lingering Covid-19 pandemic and supply-demand mismatches have further slowed the global economic outlook.
The persisting global challenges have enhanced debt vulnerabilities, slowed global trade, caused significant decline in foreign direct investment and remittances.
"The likely recession in the developed world will spur capital outflows from the developing countries forcing them to devalue their currencies, thus adding to rising inflation and consequently to increasing interest rates," the ICCB notes in its bulletin.
In Bangladesh, a major effort should be directed toward strengthening macro-prudential regulations and building foreign exchange reserves, it suggests.
Fiscal measures should carefully regulate withdrawal of fiscal support measures while ensuring consistency with monetary policy objectives, while the supply side measures should aim to ease labour-market constraints and reduce price pressures, the trade body adds.
