Near term challenges don't define long term potential

The year 2022 has been yet another challenging year. After a vibrant first quarter of economic activities, on the path of strong recovery from global onslaught of pandemic, the world was faced with another strong headwind from the geopolitical fallouts of the Russia-Ukraine war.

This time, the world saw elevated levels of inflation, followed by an unprecedented synchronised global monetary policy tightening. These created an adverse impact on volatility of interest rate, foreign exchange market and commodity prices in global as well as in local markets. Foreign currency liquidity tightness has been on the top of everyone's mind during most part of year.

The good news is that global prices of major commodities have come down by 30 per cent to 40 per cent from the peak, with the combined efforts of central bank and commercial banks, LC issuance and settlements have come down significantly, and there are expected inflows of loans from multilaterals. All of these should start contributing to improvement of foreign currency liquidity situation in the first quarter of 2023. Over 1 million compatriots left Bangladesh in 2022 who are expected to contribute to increase home remittances to Bangladesh if law enforcers take decisive action against illicit foreign currency outflows and the foreign currency market moves to market based rates.

Having said that we need to be mindful that the depressed import for a longer period will have adverse impact on production. The impact of China's return to normalcy on commodity, demand at export destinations of our products especially apparels, Bangladesh's ability to diversify products and markets for export to get the international buyers, sourcing diversification strategy etc are going to play a significant role on the economic outlook of Bangladesh for 2023.

Organisations with nimble cost structure and having the ability to respond promptly to market changes are likely to fare better than the others. The government's acceleration in digitisation of process will help reduction of system losses.

However, we believe that the long-term potential of Bangladesh should not be defined by the near-term challenges.