The Global Financial Crisis: Impact on Bangladesh Essay

16116 Words Jan 22nd, 2015 65 Pages



K.A.S. Murshid


July 19, 2009

The author would like to gratefully acknowledge the contribution of Dr. Anwara Begum, Research Fellow, BIDS and Mr. Zabid Iqbal, Research Associate, BIDS. The author is a Research Director, BIDS.


I Introduction

The world economy is currently experiencing the worst global financial crisis since the Great Depression. While major world economies have taken a massive hit resulting in negative growth rates in key countries or regions,
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These could also lead to second order effects operating through lowering of growth, balance of payment and budgetary effects, as well as micro effects on employment and poverty. Flows of FDI and ODI (including food aid) have dwindled as well, leaving LDCs like Bangladesh to deal with the crisis on their own. A saving grace has been the lack of a liberalized capital account in Bangladesh, which prevented dramatic capital outflows, and have not contributed to increased vulnerability.

The possibility of an adverse impact on agriculture has not been raised in the current debate. However, low world and Indian food prices arising from a volatile international market, has caused agricultural prices to be depressed, especially since Bangladesh imports significant quantities of agricultural produce, including cereals, from time to time. The current rice price situation suggests that the problem of farm incentives is a serious concern.

Thus, the main focus of this paper is to review the following issues:

(a) Impact of the global financial and economic crisis on the macro-economy, such as growth prospects, inflation, interest rate, level and composition of public expenditure, budget deficit, exports & imports, balance of payments, public debt, etc.

(b) Impact of GFC on different sectors of the economy like agriculture, manufacturing, construction, SME, trade etc.

(c ) Micro level impact: on households, rural-urban

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