Trade deficit narrows in stuttering economic recovery

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The deficit fell by $2.49 billion to $3.23 billion through the July-October period

Bangladesh’s trade deficit narrowed 43.5 % year-on-year to $3.2 billion in the first four months of the fiscal time, thanks to the falling trend of import as a result of ongoing economic slowdown due to the coronavirus pandemic.
 
The deficit fell by $2.49 billion to $3.23 billion during the July-October period, regarding to data from the Bangladesh Lender (BB).

“It really is an indicator of recession. Even so, it has both positive and negative factors,” said Zahid Hussain, previous business lead economist of the Environment Bank’s Dhaka office.

The trade deficit narrowed due to the negative import development, which indicates stagnated economical activities and weak domestic demand.

Import growth dropped about 13 % during the period to $15.8 billion from a year earlier. 

Investment-related imports like capital machinery and intermediate goods possess dropped significantly due to the pandemic, Hussain explained. 

The country’s export earnings grew only one 1.1 per cent to $12.5 billion in the first four months of the fiscal year, in line with the BB data.

Earnings from garment exports fell 1.2 % year-on-year $10.45 billion in the July-October amount of the fiscal year. 

Exports may fall further found in the upcoming days seeing that the next wave of COVID-19 has already were only available in Europe and America, Hussain said.

“There will not be any sustainable economic restoration from the recession for the half a year,” he added. 

The country's current balance posted a surplus of $4.05 billion in the first four months of the fiscal year due to the sharp decline in the trade gap. 

The surplus in the current account will fall when the country’s financial activities grab, said Ahsan H Mansur, executive director of the Policy Analysis Institute of Bangladesh.

The record forex reserve is also a reflection of the low trade deficit and surplus in today's account.

The country's foreign exchange reserves stood $41.25 billion on December 1, the largest yet.

Even though some may interpret the shrinking of the trade deficit just as a good indication but a much deeper analysis of the country’s import-dependent nature would reveal that it had been not sending away a reasonable message to the economy at all, said AB Mirza Azizul Islam, a former caretaker government adviser. 

A slight improvement in export earnings coupled with cash released from the donor agencies, like the World Lender, the Asian Development Lender and the International Monetary Fund, as well contributed to the improved talk about of balance of payments, the economist said.

The country’s net foreign direct investments dropped 50.2 % during the period.

The BB info also showed that the united states attained $153 million in net foreign direct investment in the first four months of fiscal 2020-21 against $307 million a year earlier.

The net portfolio investment, meant for investment in the administrative centre market, posted a $167 million deficit in July-October from $32 million in the positive.

Source: https://www.dhakatribune.com

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