BANGLADESH INSTITUTE OF INTERNATIONAL AND STRATEGIC STUDIES

MANAGING THE SPILLOVER EFFECTS OF GLOBAL ECONOMIC SLOWDOWN IN BANGLADESH

Author: Mahfuz Kabir

DOI Link: https://www.doi.org/10.56888/BIISSj2023v44n3a1

ABSTRACT

The cumulative effects of the COVID-19 and Russia-Ukraine War led the world economy to a significant slowdown. It has remarkably disrupted the global supply chains, which primarily caused high inflation across the world, and led to sharp nominal depreciation, especially in developing economies and rapid reduction of foreign exchange reserves. Developed countries introduced tight monetary policies in order to reduce high inflation, which was followed by most developing and emerging economies. The global forecasts reveal that the growth rate of world real GDP would be significantly lower in 2023 than that of the preceding year along with high exposure to financial risks that would make recovery difficult in the near term. Bangladesh’s economy has been suffering from negative spillover effects of the global economic slowdown that include prolonged high inflation, decelerated growth of real GDP, rapid decline of foreign currency reserve, and significant decline in imports of intermediate and capital goods. In order to address these outcomes, the present paper suggests, inter alia, promoting economic growth through expansionary fiscal policy and a supportive monetary policy for promoting agricultural and manufacturing sectors; increasing domestic resource mobilisation; strengthening oversight and supervision of banks; continuing regulatory import duty on non-essential goods; increasing the stock of foreign exchange reserve; and enhancing finance on climate resilience.