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Bangladesh Government to Restrict the Import of Luxury Goods
Bangladesh Bank is set to impose special conditions on the import of luxury items to discourage their consumption during times of global economic uncertainty. These new regulations set by the Bangladesh Bank emerge from the statistics of Bangladesh facing a current account deficit of 12.38 billion USD in the first 8 months of the current fiscal year- which was caused largely due to the rising level of imports. This current account deficit indicated a decrease in aggregate demand in the economy and a fall in the country’s GDP. Therefore these constraints on imports of luxury products have been proposed by the government to reduce the current account deficit and increase domestic economic activity. Consequently, this might also increase employment levels in the country and subsequently cause an appreciation in the value of the Taka.
https://epaper.thedailystar.net/Home/ShareArticle?OrgId=214ea01f955&imageview=1
Bangladesh’s Attempt at Reducing the Rapid Devaluation of Taka Against USD
The Bangladeshi currency is devaluing fast against the US dollar, and exporters from the local economy are facing a loss because more than 70 percent of the raw materials used by the readymade garment industry, the biggest exporting sector of the country, come from abroad. Bangladesh also has to import numerous goods, and since the value of the taka has fallen, imports have become even more expensive and the current account deficit is growing larger. The government believes that the value of the taka depreciated because of the increase in demand for luxury goods in the economy. The Central Bank is trying to limit imported goods and through this, is trying to contain the leakage of currency.
https://thefinancialexpress.com.bd/economy/bangladesh-bank-moves-to-stave-off-rapid-devaluation-of-taka-against-us-dollar-1650615344
The Release of New Notes Before Eid
Increasing the money supply is a component of expansionary supply-side policies. An increase in the supply of money through the release of new notes- may decrease interest rates which leads to greater investment and increased consumption. Graphically, these situations shift the money supply curve to the right. As the government now increases the money supply in the country, local businesses react by expanding their output and purchasing additional raw materials and thus, increasing commercial activity. This also increases employment from a macroeconomic perspective. Changes in the money supply have long been seen to be a significant driver of macroeconomic performance and business cycles.
Growth or price stability? Bangladesh makes its decision.
Finance Minister of Bangladesh, Mustafa Kamal, took a strong stance on the future of the economy, insisting on letting GDP growth trend at 7.5% for the fiscal year 2022-2023. However, rising global food prices, alongside oil prices amidst the Russia-Ukraine conflict can usher an aggregate supply shock here, leading to inflation. As monetary policy does not deal with the supply side, Bangladesh Bank is still maintaining its expansionary policy from the pandemic era, keeping interest rates low to reach full employment and stimulate growth. While monetary policy is not effective with supply-side issues, it can certainly hurt, signalling high NGDP growth surrounded by inflationary pressures can lead to higher inflation expectations and thus inflation becomes a self-fulfilling prophecy.
https://www.tbsnews.net/bangladesh/growth-target-fy22-remain-unchanged-kamal-410514
https://www.bb.org.bd/en/index.php/monetaryactivity/monetarypolicy
Bangladesh’s Central Bank Extends Working Capital to Enhance Productivity and Economic Growth
According to the recent economic context, the cost of production is increasing with an increase in the prices of commodities, raw materials, and transportation costs in the global market. Although businesses grind to wrap up their operating costs within the working capital credit limit sanctioned by the scheduled banks, they eventually fail to maintain the threshold. In response to these crises, Bangladesh Bank (BB) has decided to extend its working capital credit limit to experience a boost in the economy and productivity. Firms experiencing this credit limit would benefit through financed costs which would produce more output per hour of labor. This would contribute to economic growth through increased production and investment, ceteris paribus increasing the country’s GDP.
https://thefinancialexpress.com.bd/economy/bangladesh-bank-increases-working-capital-credit-limit-1651074094
The IMF Revise Down Eurozone Growth Forecast
The war between Ukraine and Russia is having a heavy toll on the economy of the eurozone as energy prices rise, wreaking havoc in the manufacturing sectors. Countries forecasted to have higher Economic growth are now seeing lesser growth patterns in their economy- leading the IMF to revise down its eurozone growth forecast by 1.1%. This is mainly due to the global supply chain disruption due to the war, the prices of energy have skyrocketed hitting the secondary sector-dependent countries and energy importers from Russia. Prices of oil have reached well over 100$ per barrel while other energy prices have increased as well. This led to a CPI of 7.5% in the eurozone which is a record high.
https://epaper.thedailystar.net/Home/ShareArticle?OrgId=214d83fcf4b&imageview=1
High Unemployment Threatens World’s 2nd Largest Economy
As lockdowns are restricting people to their homes- unemployment in China has reached the highest mark since the early days of the pandemic. As a result of increased unemployment, consumer demand has also gone down which resulted in a decrease of 3.5 percent in retail sales in March compared to the previous year. The decrease in economic activity- all combined may hint at a fall in GDP, a key economic indicator, of the economy, but it has rather increased by 4.8 percent beating all the forecasts of the analysts. However, China is still at risk of facing an economic recession following the highly increased unemployment due to the ongoing lockdowns.
https://thefinancialexpress.com.bd/economy/china-spending-employment-hit-amid-lockdowns-1650273456
The Crash of Netflix Stocks
A further 2 million projected dip than previous in Netflix’s subscriber count is predicted after Ukraine’s invasion of Russia- which resulted in a net loss of 200,000 subscribers. Streaming services and OTT platforms were an integral part of people’s daily lives, which has stopped abruptly since life is coming back to normal and inflation has made consumers cut off services that they deem as not essential. This brought a change in the cost-price index for consumers. Netflix’s new policy on preventing password sharing has also made its competitors more alluring. Failure to produce quality shows has stricken Netflix as the demand for shows, like Arcane or Squid Game, has not been satisfied with their recent productions.
Effects of the Russian Ban on the German Economy
An embargo on Russian gas imports triggered by the escalation of the war in Ukraine could plunge the German economy into a recession. The Central bank of the Federal Republic of Germany stated that an immediate EU ban on Russian gas would cost Germany, an equivalent of £138bn in lost output this year. The manufacturing sector of Germany may suffer from gas shortages in the coming years, accounting for 55% of Germany’s gas needs for industrial production. Hence, Germany may suffer from an economic slump as experts believe, the German government’s fears are based on political instinct and doomsday warnings of industrial lobbyists rather than on a concrete economic model.
https://www.theguardian.com/business/2022/apr/22/russian-gas-ban-germany-recession-bundesbank
PRICE FOR LIFE
According to the World Bank’s recent Commodity Market Outlook report, price hikes are soaring higher than ever and are expected to maintain such a shocking trend up until 2024. There are many reasons but the key one is the Russia-Ukraine war. Cost increments in commodities of which these countries are expansive makers, and manures, which depend on common gas as a generation input, have been the biggest since 2008, as per the World Bank. This news came to light when Bangladesh, being a heavy importer, encountered increased import costs with an inflation rate of 6.22% in March -the highest in 17 months. The most talked-about example is the undesirable change in soybean oil prices.
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