In the past fifty-four years, our economy has advanced significantly in terms of size, scope, and dimensions. The population has increased while the lack of good governance has intensified in a limited geographical expanse. Challenges in comprehensive management have also increased due to natural disasters. Additionally, there are the impacts of climate change, noise pollution, air pollution, and the struggles of ordinary people due to the lack of basic healthcare.
The country's economy is now also facing new major challenges. Sanctions, tariffs, and investment restrictions in the international market, along with impacts on the country's exports and investments, are affecting the situation. Added to this are inflation, sluggish economic growth, and the pressure of both domestic and foreign debt.
Experts say these risks are weakening the country's economy and will pose new challenges for the new government. Hence, timely identification of risks and the implementation of necessary actions are crucial; otherwise, problems will increase further. The recently published global risk assessment by the World Economic Forum (WEF) has identified crime and illegal economic activities, as well as geopolitical conflicts, as the first and second major risks to Bangladesh's economy this year.
Experts say these risks are weakening the country's economy and will pose new challenges for the new government. Hence, timely identification of risks and the implementation of necessary actions are crucial; otherwise, problems will increase further. The recently published global risk assessment by the World Economic Forum (WEF) has identified crime and illegal economic activities, as well as geopolitical conflicts, as the first and second major risks to Bangladesh's economy this year.
These risks are not limited to the diplomatic level and have negative impacts on exports, foreign currency reserves, employment, and investment flows, affecting current and future foreign aid. Strong countries are creating new barriers in trade and investment to protect their interests, making it difficult for emerging economies like Bangladesh to enter international markets. As an emerging export-dependent economy, Bangladesh is particularly at risk due to these changes.
The struggles of politics and economics are directly impacting the future economy of Bangladesh. We face five major risks that directly affect the country's economic stability and development: the Russia-Ukraine war, instability in the Middle East, strategic competition between the US and China, trade sanctions, and events like the restructuring of supply chains are adding pressure on our import-export, energy security, inflation, expatriate income, and investment flows.
The world's economy is gradually becoming divided, having the most negative impact on developing countries. Therefore, it is not enough for us to simply carry out domestic reforms; we must also adapt strategies to align with the realities of the global geopolitical economy. Failing to be cautious could increase risks.
The world's economy is gradually becoming divided, having the most negative impact on developing countries. Therefore, it is not enough for us to simply carry out domestic reforms; we must also adapt strategies to align with the realities of the global geopolitical economy. Failing to be cautious could increase risks.
Identifying risks in advance and preparing for them has become crucial for our country. Strengthening governance, curbing crime, implementing necessary economic reforms, and taking effective measures to maintain balance in foreign relations will be essential to tackle the challenges ahead.
According to the WEF, inflation is the third risk to the country's economy. Continuous high inflation has increased the cost of living for ordinary people, reduced actual income, and increased production costs in business and industrial sectors.
Although there has been some relief recently, complete comfort is still far away. Despite raising interest rates, there hasn't been much impact on market prices.
The fourth risk is economic slowdown. Concerns over a global recession, stagnation in domestic investment, and the pressure of repaying foreign loans are creating fears of reduced growth. Forecasts by international organisations also suggest such concerns. Bad loans, rising interest rates, labour unrest, new loan shortages, and a lack of skilled workers are slowing down economic activities.
The fifth and major risk is the debt burden. The level of debt is increasing at government, institutional, and familial levels. A significant amount is being spent on interest payments in the national budget, reducing the scope for spending on development sectors. Additionally, the recent increase in salaries for government employees has added to the overall pressure of wage and price increases.
Many believe that if this trend continues, Bangladesh may get caught in a ''middle-income trap,'' similar to many comparable countries. We know these risks are not isolated but are interlinked, weakening the stability of the economy. Crime and the illegal economy negatively impact investment, economic disputes shrink markets, and inflation and debt pressure make life more difficult for ordinary people.
A growing black or gray economy does not help leverage economic potential or confuses investors. It also acts as a major barrier to increasing government revenue.
The impending elections and the possibility of forming a new political government have instilled some hope among domestic and foreign investors, as well as the general public. However, this is closely tied to visible improvements in law and order, peace and progress in industrial areas, liquidity supply in financial markets, job creation for youth entering the labour market, the ability to address conflicting issues in this era of globalization, and the ability to progress with a greater consensus by avoiding post-election violence.
#Mamun Rashid is an economic analyst
*The opinions are the author's own.
#This article, originally published in Prothom Alo print and online editions, has been rewritten in English by Rabiul Islam.