Although Bangladesh was initially spared the worst consequences of the
global financial crisis, the lagged impacts have started to become
visible, transmitted by means of various channels. Overall, export
earnings have remained robust, driven by ready-made garment exports, but
volatility has increased. In the third quarter of 2009, there was a
significant fall in exports, with apparel exports also falling victim to
sluggish demand. At the same time, policies pursued by competitors have
had an adverse impact on Bangladesh’s competitive strength in the global
To address the emerging tasks of stimulating domestic demand and
increasing export competitiveness, Bangladesh put in place two
consecutive stimulus packages, went for a higher budget deficit and
adopted a number of other countercyclical measures.
Remittance inflows have remained robust until now: the number of
terminally returned workers is insignificant against the large stock of
workers managing to stay working overseas. However, a lower number of
outward migrants has given rise to concerns with regard to future
inflows of remittances, and has also put pressure on the domestic labour
The gross domestic product (GDP) growth projection of 5.5% for 2009/10
is the lowest in recent years, holding consequences for jobs and
incomes. The available evidence does not suggest a large number of
factories being shut down as a result of the crisis, nor does it
indicate significant retrenchment in apparels and other export-oriented
sectors; however, overtime payments and new recruitments have suffered.
On the other hand, with the majority of the population making a living
from agriculture, good harvests have meant that the poverty impact of
the crisis may have been limited. An earlier fall in commodity prices
has also been beneficial with regard to the real incomes of the poor.
With remittance inflows holding, these factors have had a positive
impact on the poverty situation in Bangladesh.
Bangladesh has been somewhat of an outlier in this crisis. However, in
view of a jobless recovery, Bangladesh will need to pursue a proactive
policy, one which continues with countercyclical measures and at the
same time is forward looking, to exploit the advantages arising from the
expected global economic recovery. Effective and timely implementation
of the recently announced support measures will be of importance in this
context. To do this, Bangladesh will need to improve its investment
climate significantly through better power and infrastructure
Rahman, M.; Iqbal, M. A.; Khan, T. I. and Dasgupta, S. Global Financial Crisis Discussion Series. Paper 12: Bangladesh Phase 2. ODI, London, UK (2010) 43 pp.
Global Financial Crisis Discussion Series. Paper 12: Bangladesh Phase 2