THE GLOBAL ECONOMIC CRISIS: IMPLICATIONS FOR BANGLADESH

This article analyzes the implications of the 2008 global economic crisis for the economy of Bangladesh. It examines the various channels through which the crisis, which originated in the financial markets of the developed world, was transmitted to a developing country like Bangladesh. The study assesses the impact on the country's key external sectors. It analyzes the slowdown in export growth, particularly in the ready-made garment (RMG) sector, as a result of the recession in the main markets of North America and Europe. It also examines the impact on the flow of remittances from migrant workers and on foreign direct investment. The research argues that while Bangladesh was less directly exposed to the financial crisis due to its relatively closed capital account, it was significantly affected through these real-economy channels. The paper concludes by discussing the policy responses of the government and the long-term lessons for managing the risks of globalization.

The global economic crisis of 2008, the most severe since the Great Depression, had far-reaching consequences for countries around the world. This paper provides a detailed analysis of its specific implications for the Bangladesh economy. The study begins by outlining the origins of the crisis in the US subprime mortgage market and its rapid transmission through the global financial system. The core of the article is an examination of the key channels through which this global shock was transmitted to Bangladesh. The first and most important channel analyzed is trade. The paper presents data showing the sharp deceleration in the growth of RMG exports as consumer demand collapsed in the recession-hit economies of the US and the EU. The second channel is remittances. The study explores the initial fears of a sharp decline in the remittances sent home by Bangladeshi migrant workers and assesses the actual, more resilient performance of these flows. The third channel is foreign investment, which saw a significant downturn as global investors became more risk-averse. The findings suggest that while Bangladesh's economy proved to be relatively resilient compared to many other developing countries, the crisis nonetheless had a significant negative impact on its growth and employment. The paper concludes by reviewing the counter-cyclical fiscal and monetary policies adopted by the government to mitigate the impact and discusses the broader lessons learned about the vulnerabilities of a highly trade-dependent development model.