The Financial Express

MCCI sees Inflation as key challenge to economic recovery

Chamber spotlights low remittance, slow vaccination, any new Covid wave among challenges against economic rebound

| Updated: November 26, 2021 14:43:09

MCCI sees Inflation as key challenge to economic recovery

Unrelenting inflation amid price rises is among some headwinds elite chamber MCCI spotlights as key challenges facing the Bangladesh economy while bouncing back from the pandemic-induced slump.

Apart from the rising inflation, the business body listed a reduction in remittances, slow rollout of the corona vaccination and any new wave of the Covid-19 pandemic as the challenges on the economic front of the nation, which is just certified by the UN as graduated from LDC status.

"Despite recent recovery trend in the economy, there are emerging challenges to be faced due to recent price rise of essential commodities, decreasing remittances, any new covid wave and slow vaccine rollout," reads its latest economic-review report.

The Metropolitan Chamber of Commerce and Industry, Dhaka released Thursday its economic review prepared for the past quarter (FY22, Q1).

To MCCI, some of the economic indicators appear to be less promising than projected earlier when the economy had been showing some signs of recovery since its reopening from corona-created deadlock.

"The fiscal framework continues to be weak in view of poor achievements on some fiscal fronts, more specifically, both in terms of revenue mobilisation and public expenditure," it says in the reappraisal.

Unemployment and investment both remained challenging in view of the premier chamber body.

MCCI suggests that a significant increase in public and private investment is necessary to maintain competitiveness and generate further growth.

The Dhaka-based chamber noted that Bangladesh, like many other countries of the world, was struggling with the number of infections and a fear of new covid-19 wave during the quarter under review.

"Reduction in coronavirus incidence gradually made majority businesses hopeful about the recovery of the economy," it further noted on the upside of the situation.

The stimulus packages comfort the business groups, from large farms to petty micro-enterprises, which eventually helped the economy to get a boost again.

"Exports and imports are two important drivers of the economy, and amid the covid-19 pandemic, both the areas have done well."

The inflow of remittances in the July-September period of FY22 decreased significantly by 19.45 per cent to US$5.41 billion from US$6.71 billion in the corresponding months of the previous fiscal year.

MCCI says this decline in remittances is a reflection of the second wave of Covid-19 pandemic situation when many Bangladeshi migrants lost their jobs, some migrants were laid off by their companies.

"Many others returned home and couldn't go back due to suspended international flights and unmet vaccination requirements," the chamber organisation commented.

Lauding robust export receipts, it said such earnings contributed to the economic recovery. The country's trade deficit widened over threefold in Q1 of FY22 for higher import-payment pressure, casting its cascading impacts on the economy.

Trade imbalance, that is, difference between the imports and exports with the rest of the world spiked by $4.46 billion to $6.50 billion during the July-September period.

Current-account deficit deteriorated further in the period under review following higher import payments and lower inflow of remittances.

But the financial account, another component of the balance of payments (BoP), remained surplus following higher inflows of medium-and long-term loans as well as aid flows, the MCCI said, quoting central bank data.

However, overall BoP posted a negative balance of $810 million in the first three months of the current fiscal year against a positive balance of $3.10 billion in the corresponding quarter of the previous fiscal year.

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