Inflation outlook uncertain next year
Inflation in Bangladesh might come down as global inflation is coming down; on the flip side, that might not materialise as the dollar shortage might not end. The upcoming national election might also have a complex impact on inflation
If the global geopolitical situation does not heat up further, which is possible, the situation in the Middle East might get worse. The Ukraine war may also intensify, and even the China-Taiwan conflict can flare up.
But if they do not and the global supply change is not disrupted by such challenges, then global inflation is not going to increase and countries that have taken anti-inflationary measures for a long time will see a decrease in inflation, as we saw in 2023. In the European and US central banks, the target inflation rate is 2% – it is almost there.
For inflation to come down in Bangladesh, first, we must get out of the dollar crisis we are facing. The dollar crisis is forcing us to check our imports, further increasing inflation. If the dollar shortage does not end, even if global inflation comes down, it will not have much effect on our economy.
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Our inflation outlook, in one word, is uncertain.
It might come down as global inflation is coming down; on the flip side, that might not materialise as the dollar shortage might not end. Because it is hampering our production, the supply of things we consume directly is not being ensured properly. On top of that, as we are not being able to import the raw materials necessary to produce goods here, our production capacity is not being ensured properly. If we cannot establish control over imports, the high inflation will not come down.
The upcoming national election might have a complex impact on inflation. This depends primarily on whether there will be any major supply-chain disruptions. If the ports remain closed or inter-district bus service is stopped, there will be an inflationary impact.
The situation might also be localised; the situation in Dhaka can be quite different from the situation in Chattogram. In some places, there might even be deflation. For example, in some villages, there is a surplus so they were planning on sending their goods to Dhaka but are forced to sell locally due to the political situation. So, it is complicated.
There is another theory that demand rises during elections, but there is not enough time for that to happen as it is quite near. Government spending has also not gone up much from last year. So, if the inflation situation is indeed impacted, it will be on the supply side.
