The finance ministry has projected that export growth will drop to 20% in FY23 because surging inflation in Bangladesh's major trade destinations, such as the United States and European Union, is likely to rein in the hot streak that the country's export sector has been experiencing following the release of the pent-up demand once global economies reopened.
The falling exports will also cause imports of raw materials to come down to 12% from 30% estimated in the revised budget of the ongoing fiscal year, as predicted by officials at the Finance Division.
Besides, the government's various measures to discourage imports amid rising commodity prices in the international market and dollar crisis in the country will further dampen import growth.
However, Finance Division officials expect a 16% growth in remittance inflows, which has registered a negative growth throughout the current fiscal year, riding on exports of more than 5.5 lakh workers to different countries in post-Covid times.
According to finance ministry officials, exports in July-April of the current fiscal year exceeded the $43 billion mark with more than 35% year-on-year growth.
A dent on buoyant exports?
In the remaining two months, May-June of FY22, the buoyant exports might face a blow because of a record rise in inflation in the US, the EU and United Kingdom, the main buyers of Bangladeshi products, under knock-on effects arising out of the Russia-Ukraine crisis.
In 25 days of the current month, the major export earner apparel sector raked in around $2.2 billion, which was $800 million lower than in April, according to an updated data from the National Board of Revenue's customs department.
As the apparel export trend in this current month except the Eid holidays suggest, the receipts might tick up a bit in May as opposed to the amount received in the same month a year ago, but the robust export growth, 36% on average experienced in the last eight months, will no longer be there, Shahidullah Azim, vice-president at Bangladesh Garment Manufacturers and Exporters Association (BGMEA), told The Business Standard.
In September-April, RMG export earnings stood at $3.5-$4 billion per month.
Md Fazlul Hoque, managing director at Plummy Fashions Ltd, one of the top listed green certified RMG factories in Bangladesh, told TBS, "I think that the export growth we have witnessed in the last few months will not continue in June as a flow of work orders has already slowed down. Inflation is soaring globally and recession is likely on the way too."
In such a situation, consumers globally have slightly cut down on expenses on clothing to meet extra costs for food and fuel, he noted.
"If inflation continues to rise across Europe and America, our apparel exports might fall," he said.
In FY21, Bangladesh's exports amounted to $38.75 billion. According to the revised budget target, exports will reach about $50 billion by the end of the current fiscal year. Export earnings in the next fiscal year will stand at $60 billion if it grows at a 20% rate.
The 2018-21 export policy had targeted a $60 billion in exports but fell short of it by 25% owing to the pandemic onslaughts. The then BGMEA leaders said the target was achievable as $50 billion would come from the exports of readymade garments alone.
In the new export policy order, the commerce ministry has set a target to earn $80 billion in exports by 2024.
Economists and exporters say Bangladesh's exports rebounded strongly on the back of a rapid rise in aggregate demand in the western world with the normalisation of Covid-19 and the shifting of some work orders from China and Vietnam to Bangladesh.
But the global economy started facing serious supply blows since the beginning of the Russia-Ukraine war on 24 February, and there is no sign of overcoming the situation anytime soon, they also say, adding that prices of imported goods continue to soar because of supply chain disruptions, stoking inflation worldwide.
According to a recent BBC report, US inflation hit the highest level not seen in nearly 40 years. Besides, many European countries have been caught in the highest inflation in a decade.
Citing US fashion brand Target Corp, a Bloomberg report said the brand saw a sudden slowdown at the beginning of March as Americans were grappling with rising food and fuel prices.
"While retailers have seen weaker demand for clothing, this has been led by reduced interest in casual apparel," according to the report.
Some international media are also talking about the fear of global recession.
Dr MA Razzaq, chairman at Research and Policy Integration for Development, told TBS that central banks in Europe and the US raised interest rates to control inflation. As a result, our exports might decrease owing to a fall in consumer spending in those countries.
And, the export growth rate may not be the same as in the previous months, he noted.
But many more apparel orders may shift to Bangladesh from China as the latter cannot ship goods on time for various reasons, including lockdown there, he also said.
"So, we cannot reach any conclusion right now," MA Razzaq said.
Govt hopes big on remittances
In the current fiscal year's budget, the government had expected a bigger growth in remittance inflows as it experienced more than 36% growth amid the pandemic in FY21.
Remittances had registered a negative growth in nine months of the fiscal year, except for April ahead of Eid-ul-Fitr.
The finance ministry set a 1% growth target in the revised budget of the current fiscal year in the hope of getting additional remittances from expatriates before Eid-ul-Azha next July. The remittance inflows will stand at $25 billion at the end of this fiscal year as per the revised budget's target. The remittance received in the first 10 months of FY22 amounted to $17.3 billion.
Around $8 billion in remittances will be needed in the remaining two months to meet the target. According to estimates for FY23, remittances will stand at $29 billion.
In FY21, Bangladesh received remittances amounting to $24.77 billion.
Import payments projected to reach $88 billion in FY23
In July-April of the current fiscal year, Bangladesh's import payment stood at $73.43 billion with a 41% year-on-year increase. In FY21, the country imported goods worth $60.68 billion.
The finance ministry had projected 11% growth in imports in the current fiscal year's budget. At the end of the fiscal year, imports were supposed to reach $67.35 billion. But with two months left of the fiscal year, $6 billion more than the entire year's estimate has already been spent on imports.
The country is having to spend additional money on imports of food items, fuel and fertilisers owing to surging prices in the international market. That is why import expenses surpassed the estimated budget in the 10 months.
The finance ministry estimated a 30% growth in imports in the revised budget of FY22. As per this calculation, imports will amount to nearly $79 billion at the end of the current fiscal year. The imports will reach $88 billion in the next fiscal year if the estimated 12% growth is achieved.
In this way, if export-import growth is achieved as per the budget projections made by the government for the next fiscal year, Bangladesh's trade deficit will stand at $28 billion.
Deficit in balance of payment to hit $11.74 billion
Finance ministry officials think that the deficit in the balance of payment in the next fiscal year will be huge – 1.56% of GDP, despite projections of high remittance inflows and falls in both exports and imports.
In the revised budget for the current fiscal year, the government has set the balance of payments at 2.56% of GDP. In the current fiscal year's budget, the current account deficit was estimated at 0.06% of GDP.
The revised budget for the current fiscal year puts the GDP size at $458.5 billion and the balance of payments deficit at $11.74 billion.
The GDP size for the next fiscal year has been estimated at $512.4 billion, with a $8 billion deficit in the balance of payments that year.
According to the revised budget for the current fiscal year, the foreign exchange reserves will stand at $42 billion in June, which will increase to $43.50 billion in June next year.