global financial crisis and its impact on bangladesh economy (premier university)
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this presentation has been prepared on the basis of global financial crisis 07-08 , we the students of premier university have prepared this slide and have tried to show the impact of global financial crisis on Bangladesh economyTRANSCRIPT
Global financial crisis and its impact on Bangladesh Economy
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Presentation on
Group MembersNAME ID NO
1.Sudeshna Das 0816112280
2. Susmita Sen 0816112275
3. Farjana Karim 0816112289
4. Munmun Dev Nath 0816112271
5. Prasenjit Roy Chowdhury 0816112308
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.
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.
Impact on Bangladesh Economy
1. Impact on the macro economy
2. Impact of GFC on different sectors of the economy like agriculture, manufacturing, construction, SME, trade etc.
3. Micro level impact: on households, rural-urban poverty, inequality, gender issues
4. Mitigation and policy: policies adopted, recommendations
Bangladesh: Export Performance
Bangladesh’s export earnings have risen rapidly since the early 1990s
driver of our exports sector is the ready-made garments industry (RMG)
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
any impact on the country’s export processing sector, and in particular on the large RMG sector, will adversely affect economic performance.
Export performance in 2008
The country’s exports grew by 16.7 percent in 2008 compared to less than 7 percent in 2007 and around 23 percent in 2006
Impact on ExportsBangladesh had been facing problems in the EU market
The main advantage of Bangladesh over its competitors is its price.
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
Impact on Imports
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
Bangladesh benefited greatly with domestic price pressures falling quickly, and the government making large savings from reduced subsidies, especially on diesel.
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.
IMPACT ON REMTTANCES
Remittance is 10% of BD’s GDP.FY 2009 $9.7 billions.Out Migration reduced by 30% in FY 2009.
Impact on Banking
Causes of financial crisis in banking: Relentless lending of mortgage loans.
Mortgage backed securities. Real estate market crash the bank
accounts.
Reasons for problem in banking sectors Volatility in the macro
economy. The structural weaknesses. Hazardous banking practices . Ineffective regulation and
monitoring.
Global financial crisis and Bangladeshi Banking Sector
Accommodative monetary policy.TAKA is not freely convertible.Foreign reserve in Bangladesh Bank.Steps to avoid risk.
Impact on Capital Market
Foreign portfolio investment.
Equity marketsituation.
Good news
Impact on Unemployment
Bangladeshi workers working overseas.
Private sectors within the country.
Vulnerable sectors.More Poverty.
the lending rate is not feasible• 12.29 percent in June, 2008 as compared to 12.75 per cent in December, 2007
the business community was pursuing for a higher cut in the lending rate
Liquidity crisis•Lower deposit rate due to lower lending rate
Global financial crisis and its impact on interest rate
Lower lending
rate
Lower deposit
rate
Inflation
At the end of August, 2008 Taka per USD decreased to Tk.68.52 from Tk.68.70 at the end of August, 2007.
Taka
USD
Impact on Foreign exchange
After August 2008 taka was appreciating against the EURO owing to the global financial crisis.
BDT
EURO
Impact on Foreign exchange
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.
Impact on inflation
Inflation rate decline from 10.82 percent in July’08 to 6.03 percent in December’08, currently hovering at around 5 percent (in July 2009).
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.
Impact on Real Estate Sector
The global financial crisis hit FDI inflows from US and Europe. Already, the FDI inflows to the country have started declining.
Global financial crisis and its impact on Bangladesh economy
IMPACT ON AGRICULTUREIMPACT ON GDP GROWTH
IMPACT ON PUBLIC BUDGETIMPACT ON FOREIGN AID
Price slumpFarmers were in distress
Impact on Agriculture
Slowdown in overall economic growth.
Bangladesh’s GDP growth may fall to 6.19 percent this year.
Probable effects of the global financial turmoil on exports and remittances.
Impact on GDP Growth
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 2009-10.
Public Finance/ Budget
Impact on Public Finance/ Budget
Food aid declined dramaticallyCuts in aid would mount a pressure on
Bangladesh government’s budget
Impact on Foreign
Aid
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
FINDINGS Bangladesh’s export growth rate. Export of non-apparels items. Depreciation of currencies. Remittance earnings. The adverse affects. Indicators of macroeconomic.
Thank you
Any questions???