World Economic Forum forecasts in its Chief Economists Outlook 2023
Intense concerns of a global recession and geopolitical tension is now the new economic reality, but Bangladesh stands to benefit from diversification of manufacturing supply chains away from China, says World Economic Forum (WEF).
A majority of WEF’s community of chief economists expects a global recession in 2023, sees geopolitical tensions continuing to shape the global economy, and anticipates further monetary tightening in the United States and Europe.
These are the key findings of the Chief Economists Outlook, launched on Tuesday at the World Economic Forum Annual Meeting in Davos-Klosters, Switzerland.
Almost two-thirds of chief economists believe a global recession is likely in 2023, of which 18 per cent consider it extremely likely – more than twice as many compared to the previous survey conducted in September 2022.
However, amid the uncertainty, there is hope for Bangladesh as a South Asian nation to gain in exports because of the business’ relocation away from China.
The survey highlighted significant regional divergence in growth expectations within a general pattern of weakened expectations relative to the last survey.
The two strongest regions in 2023 according to the survey are the Middle East and North Africa (MENA), and South Asia. In South Asia, 70 per cent of respondents expect moderate, 15 per cent strong and 15 per cent very weak growth.
“Some economies in the region, including Bangladesh and India, may benefit from global trends, such as a diversification of manufacturing supply chains away from China,” mentions the WEF survey.
How can Bangladesh gain?
After the outbreak of Covid-19 pandemic and ongoing Russia-Ukraine war, which disrupted the supply chain, global apparel buyers started to reduce single country dependency and relocate sourcing destinations.
Most of the brands, buyers and retailers focused on South Asian markets, and as the second largest exporter of RMG products, Bangladesh has already experienced a lot of gains.
In the last 10 years, Bangladesh increased its share in global apparel export markets by 1.7 percentage point to 6.4 per cent in 2021 with export earnings of $34 billion.
According to World Trade Statistical Review 2022, Bangladesh’s global market share stood at 6.4 per cent in 2021, which was 4.7 per cent in 2012. During the same period, China lost 5 percentage point market share to 32.8 per cent in 2021. Chinese market share dropped to 32.8 per cent in 2021, which was 37.8 per cent in 2012.
Bangladesh gained the most in the last few years from China’s loss, while other countries such as Vietnam, Turkey, India and Pakistan also took slices from the pie.
Vietnam holds 5.8 per cent market share, followed by Turkey at 3.5 per cent, India 3 per cent and Malaysia 2.7 per cent.
Speaking to The Business Post, Snowtex Group Managing Director SM Khaled said, “We are already benefiting because of the diversification of the manufacturing supply chain away from China.
“For the last three to four years, we are gaining more, and the ongoing turmoil will provide us with the opportunity to grow further. Our market share was around 4 ten years ago, which is now at nearly 7 per cent.”
He added that on the other hand, China’s share dropped to around 33 per cent from nearly 40 per cent. These figures show the real scenario.”
Khaled then pointed out, “The recent shift from China not only benefited Bangladesh, but also countries such as Vietnam, India, Pakistan and Sri Lanka. But Bangladesh will gain more as Sri Lanka, Pakistan, and Myanmar are going through a crisis.
“The US, EU, and Japan are now choosing Bangladesh as their prime sourcing destination. If we look into the present export growth it is higher than our competitors. Apparel Exports grew by 15.56 per cent to $23 billion in the first half of FY23, while in the FY22 it stood at $42.61 billion with 35.47 per cent growth.”
How can we cash in?
Former lead economist of World Bank Dhaka Office Zahid Hussain said, “Here is a great opportunity for Bangladesh to gain, mostly from the clothing sector. But due to a lack of predictable and credible policy, we may not be able to cash in on the opportunity to the fullest.
“Aside from adequate infrastructure, the government must also ensure uninterrupted power and energy supply to the investors and existing factories at an affordable price. In addition, there is also a shortage of skilled manpower, but our competitors do not have this problem.”
To attract investors and investments relocating from China, we have to ensure repatriation of investment returns without any hassle, the economist pointed out.
Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Faruque Hassan said, “We will definitely be able to take advantage from the diversification of manufacturing as we are offering goods at a reasonable price compared
to China.
“Even amid the Covid-19 pandemic, we recorded robust growth in exports. But there is a fear of the global market falling, and if it happens, we may face negative growth.”
Beyond the RMG sector Bangladesh can also gain from other sector like leather and leather goods, non-leather footwear, home textile.
Metropolitan Chamber of Commerce and Industry (MCCI) President Md Saiful Islam said, “As we are making basic products needed for everyday life such as leather goods and footwear. So amid the crisis, the demands of these goods will remain same and we will get orders.”
“If half-year export performance is taken into consideration, there is better growth, and it will continue as buyers are looking towards South Asia, where our competitors Sri-Lanka and Pakistan are in trouble.”
Islam, also the managing director of Picard Bangladesh – a leather goods exporter, added, “In addition to this, the Chinese Zero Covid-19 policy is another plus point for us, as it is impacting their production and put bar on buyers movement there.
“As a result, buyers will move to Bangladesh as we are offering a safe and better environment to do business.”
During first half of FY23, exports earnings from leather and leather goods rose by 13 per cent to $637 million, which was $564 million in the same period last year.
