WEF Global Risk Report 2024: Bangladesh economy faces five risks
Currently, fuel shortage has become a major risk for the Bangladesh economy with the fuel supply crunch disrupting production in the country’s industries. The rising high inflation also poses risk to the economy in addition to other risks that include growth slowdown, rise in wealth and income disparity, increased government debt and unemployment, according to a World Economic Forum (WEF) report.
The WEF, based in Davos, Switzerland, revealed the risks in its Global Risk Report 2024 released on Wednesday ahead of the 54th Annual Meeting of the WEF, to be held in Davos-Klosters on 15-19 January.
The WEF report found out the general risk factors for global economy in addition to identifying specific risks for various countries including Bangladesh.
The WEF released the Global Risk Report 2024 several days after the World Bank predicted in its biannual report on Global Economic Prospectus that global economy will see the lowest growth in 2024 since the coronavirus pandemic passed.
The WEF identified global risk in short term and long term. The 10 main global risks in the short term (2 years) are: misinformation and disinformation; extreme weather events; societal polarization; cyber insecurity; interstate armed conflict; lack of economic opportunity; inflation; involuntary migration; economic downturn and pollution.
The non-government research organisation Centre for Policy Dialogue (CPD) worked as the local partner of the WFP, and the list of risks were assessed by conducting survey on 71 companies.
CPD research director Khandaker Golam Moazzem told Prothom Alo the survey that was carried out on businesses found fuel shortage is one of the major risks now. It has been learned that 60 per cent of gas is being supplied against the total demand, disrupting production in industries dependent on gas such as ceramic, steel and textile.
It has been learned that the authorities concerned are rationing gas supply to factories due to shortage of gas. Export-oriented industries are getting the gas, but small and medium enterprises are not receiving it as per their demand. The government cannot ensure gas supply even after raising the gas price although they said while hiking the gas price that there would be uninterrupted gas supply.
Besides, power traffic hike also increased the production cost in industries, according to the WEF report.
Inflation, according to the Global Risk Report, has become the second risk to the businesses in Bangladesh. Khandaker Golam Moazzem said inflation affects directly and indirectly. Demand for wage rise grows and people’s purchasing power drops are the direct impacts of inflation while business face uncertainty on long term investment due to high inflation is the indirect impact. A high inflation also hampers balance of trade, as well as opening of LC (letter of credit), and export competition capacity of exporters also decreases, he added.
Unlike the previous year, this time businesses mentioned disparity in both income and wealth posing a risk to economy. Regarding this, Khandaker Golam Moazzem said the issues have been discussed across the globe and businesses in Bangladesh have understood its importance.
If high income inequality exists purchasing power of low-and middle-income people does not rise that much. The problem is when the high-income people accumulate money and wealth they do not spend much of that additional money. Many even spend money aboard. But, the middle class is the main consumer of the society, and if their income does not rise expansion of the economy slows, he added.
Analysts say high inequality results in social instability. Workers’ movement demanding wage hike intensifies. Many analysts observe high inequality becomes a barrier to economic growth at on stage.
The Global Risk Report further said Bangladesh will lag behind in fulfilling the Sustainable Development Goals (SDGs) due to funds crunch. To meet the SDGs by 2030, Bangladesh needs to invest USD 400 per capita, but the WEF predicted the investment may rise to USD 230 per capital during this period.
A rise in government debt as well as unemployment is the first risk posing to the economy. According to the WEF report, rise in government debt slows private sector credit flow, hampering investment. Businesses have been vocal against it in the past. An increase in government debt also results in rise in bank lending rate.
CPD’s Golam Moazzem said when the implementation pace of a government project slows and the budget of a government project is revised, return from that certain project diminishes. Again, a rise in government debt may somewhat create an instable situation in macro economy, and investors do not want that, he added.
Previously, businesses identified five main risks to the economy of Bangladesh. Those were: high inflation, debt crisis, impact of high prices, manmade environmental damage and geopolitical competition over resources.