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Presentation on

Global financial crisis and its impact on Bangladesh Economy

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Group Members
NAME NO 1.Sudeshna Das 0816112280 2. Susmita Sen 0816112275 3. Farjana Karim 0816112289 4. Munmun Dev Nath 0816112271 ID

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Origin of the crisis

The crisis in the global financial

markets that became manifest in August 2007 is the byproduct of developments since 2001 when the US economy was experiencing a severe recession.
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How the crisis did spread?

The crisis that originated from

plunging house prices and stock price declines in the US, spread to Europe and Asia & developing countries.
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Impact on Bangladesh Economy

Impact on the macro economy Impact of GFC on different sectors of the economy like agriculture, manufacturing, construction, SME, trade etc. Micro level impact: on households, ruralurban poverty, inequality, gender issues Mitigation and policy: policies adopted, recommendations

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Bangladesh: Export Performance

Bangladeshs export earnings have risen rapidly since the early 1990s
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driver of our exports sector is the ready-made garments industry (RMG)

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any impact on the countrys export processing sector, and in particular on the large RMG sector, will adversely affect economic performance.
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The export sector was potentially vulnerable to the financial crisis as it heavily depends on the EU and US markets which have been badly hit
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Export performance in 2008

The countrys exports grew by 16.7 percent in 2008 compared to less than 7 percent in 2007 and around 23 percent in 2006

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Impact on Exports
Bangladesh had been facing problems in the EU market
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The main advantage of Bangladesh over its competitors is its price.

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RMG Sector:
Global recession may generate two possible opposing forces towards export of RMG:

Decline in order due to recession

Increase in order due to substitution of orders towards cheaper products and low cost source

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Impact on Imports
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The country is dependent on POL imports from the world market and is also a significant importer of food. The domestic economy was quite sensitive to movements in the world price of these key commodities during GFC. The advent of the recession brought prices down drastically
8/30/12 Bangladesh benefited greatly with

Bangladesh has also benefited from the terms of trade effect as the import prices faced fell more sharply than export prices. Total merchandise imports to Bangladesh during FY08 amounted to USD21.63 billion, registering a growth of 26.07 per cent compared to the corresponding period of FY07.

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Remittance is 10% of BDs GDP. qFY 2009 $9.7 billions. qOut Migration reduced by 30% in FY 2009.
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IMPACT ON REMTTANCES

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Impact on Banking

Causes of financial crisis in banking: Relentless lending of mortgage loans. Mortgage backed securities. Reasons for problem in Real estate market crash the banking sectors bank accounts. Volatility in the macro

economy. The structural weaknesses. Hazardous banking practices . Ineffective regulation

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Global financial crisis and Bangladeshi Banking Sector

Accommodative monetary policy. qTAKA is not freely convertible. qForeign reserve in Bangladesh Bank. qSteps to avoid risk.
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Impact on Capital Market

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Foreign portfolio

investment.
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Equity market

situation.
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Good news

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Impact on Unemployment Bangladeshi workers working overseas.

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Private sectors within the country.

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Vulnerable sectors. More Poverty.

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Global financial crisis and its impact on interest rate

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Impact on Foreign exchange

At the end of August, 2008 Taka per USD decreased to Tk.68.52 from Tk.68.70 at the end of August, 2007.

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Impact on Foreign exchange

After

August 2008 taka was appreciating against the EURO owing to the global financial crisis.

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Impact on inflation
The

prices had taken a downward in the face of global financial crisis. Except for soybean oil prices of all other major commodities including rice, wheat and crude oil suffered a falling price since September 2008.

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Inflation rate decline from 10.82 percent in July08 to 6.03 percent in December08, currently hovering at around 5 percent (in July 2009).

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Impact on Real Estate Sector

Bangladeshi expatriates living in the USA, Britain and other countries might face job cuts. The country's real estate sector which had been growing at a pace of double digit until 2006 could have a negative growth in 2009 and 2010 as a result of global recession.

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The global financial crisis hit FDI inflows from US and Europe. Already, the FDI inflows to the country have started declining.

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Global financial crisis and its impact on Bangladesh economy

IMPACT ON AGRICULTURE Click to edit Master subtitle style IMPACT ON GDP GROWTH IMPACT ON PUBLIC BUDGET IMPACT ON FOREIGN AID

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Impact on Agriculture
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Price slump Farmers were in distress

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Impact on GDP Growth

Slowdown in overall economic growth. Bangladeshs GDP growth may fall to 6.19 percent this year. Probable effects of the global financial turmoil on exports and remittances.

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Public Finance/ Budget

Total revenue collection in 2008-09 was estimated to fall short of target by around 2 percent. First stemming from the sharp rise in food and fuel prices. A collapse in world commodity markets and reduction in import-based duties and taxes The size of the budget deficit was estimated to be 3.19 percent of GDP in 2008-09 & rising to 4.5 percent in 2009Click to edit Master subtitle style 10.

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Impact on Public

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Impact on Foreign Aid

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Food aid declined dramatically Cuts in aid would mount a pressure on Bangladesh governments budget

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Why Bangladesh remained Less Affected

@ Bangladesh's financial system has reasonable

resilience capacity to safeguard the stability of banking and financial systems. @ The robust growth of agriculture @ overwhelming dominance of RMGs in the export @ In case of imports @ Remittance inflow

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FINDINGS
Bangladeshs export growth rate. Export of non-apparels items. Depreciation of currencies. Remittance earnings. The adverse affects. Click to edit Master subtitle style Indicators of macroeconomic.

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Thank you

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Any questions???

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