Bangladesh’s external trade risks face formidable challenges in 2016, as slowdown in European economies and Trans-Pacific Partnership agreement may weigh on its prospects, said the International Monetary Fund. Political uncertainty and weak banking sector are two major local factors to affect the economic expansion, a report of the IMF’s Article-4 mission said. The mission that visited the country in mid November asked the government for reforms in the financial sector, and plug loopholes in the battered banking industry to cushion the possible economic shock. ‘A resumption of political violence or heightened uncertainty would adversely impact investment, growth, and inflation. Continued weakness in the banking sector, in particular at the SBs, could undermine credit and growth prospects and affect fiscal sustainability, as would a failure to launch the new VAT,’ reads the report. ‘On the external side, a protracted slowdown in the European Union could hurt exports. Implementation of the trans-pacific partnership, of which Bangladesh is not a member, could also erode the competitiveness of exports to TPP member countries (which account for around one-fourth of Bangladesh’s exports), though the impact is likely to be mitigated by Bangladesh’s significant cost and scale advantages.’ Moreover, the IMF said the outlook for remittances in 2016 was uncertain; while worker outflows had recovered, persistent low oil prices could eventually affect investment and employment in key host countries. ‘From a broader perspective, natural disasters and global climate change pose major risks for Bangladesh. Linkages with large emerging market economies and international financial markets remain limited, cushioning against potential shocks from these sources,’ the report elaborated. The TPP trade deal, signed in October in Atlanta, USA, among 12 nations accounts for nearly 40 per cent or US$ 30 trillion of the global economy. The officials concerned in the ministry of commerce, however, said the TPP would not emerge as a major threat for Bangladesh export business for at least five years of its being. ‘Our preliminary assessment suggests the TPP would not be a threat for Bangladesh for the initial five years after it comes into being,’ Monoj Kumar Roy, additional secretary, MoC, told New Age. Monoj said they were not that spooked or nervous over the possible trade diversion due to TPP. Trade ministers from 12 nations—the USA, Canada, Mexico, Japan, Australia, Vietnam, New Zealand, Malaysia, Singapore, Brunei, Peru and Chile—signed the largest trade-liberalising pact in October, last year. The trade deal will come into effect after the signatory countries ratify the deal. ‘Our apparel industry has become reasonably competitive than any south-east Asian nation,’ Monoj said further. Ahsan H Mansur, executive director, Policy Research Institute of Bangladesh, said the TPP would not weigh on Bangladesh economy during the initial two to three years, but the impact would be felt severely afterwards. Indonesia and the Philippines have been in the process to join the TPP, Mansur said, adding, ‘Bangladesh should also ready itself to become a party to the trade deal.’ ‘We have to reduce the tariff protection, bring in reforms in different trade rules, and become compliant from the environment point of view to be eligible for an entry to any regional or multilateral trade deal,’ Mansur told New Age.
