Kazi Zahidul Hasan :
Russia’s attack on Ukraine could have economic repercussions globally and in Bangladesh,pushing up inflation as gas, oil and food prices have risen around the world.
Global oil and natural gas prices soared for supply disruptions from Russia, one of the world’s largest oil and gas exporters, and Ukraine, a major transit country for Russian gas.
“The ongoing conflict between Russia and Ukraine will definitely have impact on the Bangladesh economy. The immediate impact will be associated from the rise in global energy and commodity prices,” Dr Zahid Hussain, former lead economist at the World Bank’s Dhaka office, told The New Nation.
He said that crude oil prices have touched $100 per barrel even before Russia’s invasion of Ukraine. Now, after the Russian invasion, oil prices reached $110 a barrel for the first time since 2014 and they are likely to remain at high levels for a long time to come. At the same time, prices of other commodities which Bangladesh imports, continue to rise in the international market.
“A sustained rise in oil and food prices would have adverse impacts on Bangladesh economy, manifested through higher inflation, widening trade deficit, weakening currency, current account and fiscal balances, and a squeeze on economic growth,” he added.
From July-December of this fiscal, the country’s trade deficit hit record high at $8.billion as import surpassed export in a big margin. “The global commodity price hike will fuel the enormous trade deficit and put pressure on the country’s balance of payment,” he said, adding, “Besides, soaring commodity prices will leave import payment high and make exchange rate further unstable in the short-term”.
Regarding the impact on Bangladesh’s export trade, Dr Zahid Hussain, “Russia and Ukraine are not big markets for Bangladeshi merchandises. However, the country’s exports have been growing consistently in Russia over the last five years.
“Bangladesh’s annual export earnings stood at $800 million from exports in Russia and Ukraine and the country’s is set to lose its export in these countries as an immediate impact of the ongoing war.”
Moreover, the war could also impact inward remittance flow from the central European countries where many Bangladeshi expatriates have been living for years,” he noted.
Dr Zahid Hussain said, also said that there are also concerns that financial and trade transactions with Russia following Western scansions against Moscow and shutting out major Russian banks from the SWIFT payments system. Targeted sanctions imposed by the European Union and the United States against Russiaand its banks can also leads to uncertainty over channelizing Russia’s aid disbursement to Bangladesh as well as shipping machinery and equipment for the Rooppur Nuclear Power Plant (RNPP), being built by the RussianRosatom State Atomic Energy Corporation.
He said Bangladesh was expected to receive $7.0 to $8.0 billion financial aidfrom Russia.The country was supposed to get a large portion of the aid in form of machinery import for the implementation of RNPP project. “It is still not clear how Russian authority will send the consignments when world’s renowned container shipping companies continue to suspend cargo bookings to and from Russia.”
World’s three largest shipping giants-Switzerland-based MSC, Denmark’s Maersk and France’s CMA CGM-announced on Tuesday that they would halt cargo bookings to and from Russia until further notice, joining a fast growing of list of companies to shun Moscow over its invasion of Ukraine.
Dr Zahid mentioned that the confluence of Russia’s invasion of Ukraine and the barrage of punitive Western sanctions pose a ‘real risk’ to the global economy that is yet to fully recover from pandemic shock. Being an integral part of the global economy, Bangladesh is also exposed to the ever-evolving situation.
“A prolonged conflict, tougher Western response and disruptions to Russia’s oil, gas and food staples exports would deliver a bigger energy shock and a major blow to the economies around the world, especially the European countries. This could invite a severe consequences to these advance economies dragging down consumers demands. In worst case scenario, import from Bangladesh from European countries can fall significantly.”
Annually, the EU countries import goods worth $18.7 billion from Bangladesh, that is, over 50 per cent its exports.
