Recession starts affecting local economy though slowly

Exports start feeling recession pinch: Muhith

Staff Correspondent

Dhaka, Feb 8 ( – Finance minister AMA Muhith has said the
global economic recession is finally having an impact on the local export trade and a taskforce was being formed soon to counter the fallout.
He, however, made clear the taka will not be devalued against the US dollar. The foreign exchange rate would depend on the market and there would not be any government interference.
"There is a negative affect of the global economic meltdown on the sectors of jute, jute-made goods, frozen items, knitwear and woven clothes industries," Muhith said after a meeting with representatives of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA).
"The first meeting of the taskforce will be held at the end of the current month or at the beginning of next month."
The minister also said the impact of the recession will be temporary due to reserve fund liquidity in global economy.
"So, we have nothing to be afraid of," he assured the audience.
Muhith said the recession which started in 2008 would not have become so bad if the US had acknowledged it in the beginning.
"The BKMEA representatives have asked for an increase in cash assistance and facilities in export and other sectors."
He added that the proposals would be evaluated by the government.
BKMEA president Fazlul Huq said, "We are seeing an adverse impact on the knitwear sector as foreign orders have plummeted."
He said compared with December 2007, export went down by 2.5 percent in December 2008. But, it increased 22 percent in December 2007 comapred with the same month of 200.
"We have asked the government to increase incentives to knitwear sector from 5 percent to 10 percent and a special 5 percent incentive on total export," added the BKMEA president.
"We have asked for immediate 5 percent incentive on total export until next December."
On the devaluation of the taka, Huq said, "We are against the devaluation of the taka and though devaluation at the moment will facilitate exporters, in the long run the people of the country will be affected."
Bangladesh introduced a floating exchange rate mechanism on May 31, 2003. Since then the government has not intervened in exchange rates.
Huq said that if the taka was devalued then import cost would increase and the price of essentials would soar.
"For this reason we are against the devaluation of the taka," he explained.
Muhith just last week had said that Bangladesh was still insulated from global economic downturn.
"IMF has predicted that the GDP of all countries will come down alarmingly due to global recession, but in spite of this global gloom, our economy is still in good condition," Muhith said on Feb 3 (Tuesday) after a meeting on finance and currency.
The minister said Bangladesh's economic indexes were still sound.
"GDP growth is forecast to be above 6 percent for FY 2008-09," he said.
Muhith also told reporters at the time that a presentation would be made at the next session of parliament on the overall economic situation of the country.