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Professor Mustafizur Rahman on Eurozone crisis

Published in The Financial Express on Friday, 10 July 2015.

Greek crisis set to hit BD exports to EU

FHM Humayan Kabir

The latest Greek crisis is likely to hit Bangladesh’s export market and lower shipment growth in the coming months as it may lead to depreciation of Euro further, trade and financial analysts said Wednesday.

Garment exporters claimed that the fall of Euro has already been affecting shipment to the European markets as they lost nearly 8.0-9.0 per cent price in that destination.

The European countries including Germany, the United Kingdom, France, Spain, Italy, Belgium, the Netherlands, Greece and Turkey constitute the largest market for Bangladesh’s readymade garment (RMG) exports.

According to the Export Promotion Bureau (EPB), over 55 per cent of the country’s export earnings come from the EU countries.

Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Atiqul Islam said the RMG might be falling into further trouble after the economic crisis in Greece.

“We have already lost nearly 8.0-9.0 per cent price in European markets due to the fall of Euro and the Eurozone crisis. In addition, the crisis in Greece will deepen the problem further,” he told the FE.

Executive Director of the Centre for Policy Dialogue Professor Mustafizur Rahman said the Greek crisis could deepen and prolong the Eurozone crisis.

“If the Eurozone crisis is prolonged, the Euro could be depreciated further. Then Bangladesh’s exports may be affected again in the coming months,” he told the FE.

Economist Dr Ahsan H Mansur said the economic crisis in Greece has a bad signal for the continuously struggling Eurozone economy. “In the next 2.0-3.0 years, the Eurozone may not be able to overcome the fall of Euro and Greek debt crisis.”

“Since Europe is the key export destination of Bangladesh, the fall of Euro against the US dollar and local currency would affect the country’s exports negatively in the near-term,” he told the FE.

Dr Mansur, also the Executive Director of the Policy Research Institute (PRI), said if the Euro falls against the US$ and Bangladeshi currency Taka, the Bangladeshi products will lose its competitiveness in the European markets. Vietnam, India and Indonesia, whose local currency is weaker, would get the benefit.

He said the local currency Taka has been appreciated nearly 22 per cent against the currency baskets of Bangladesh’s export-destination countries.

Dr Mansur suggested the government to take quick policy measurers to address the Eurozone impact on the economy.

He advised the government to depreciate the local currency Taka and enhance the efficiency of the garment-makers to recover from the losses.

Economist Mirza Azizul Islam said when the Euro will maintain weak trend against the US$, the European buyers will be putting pressure on Bangladeshi RMG makers for reducing prices of the products.

Since the Bangladeshi garment-makers receive most of the payment in the strong US$, the European buyers will bargain the price for a cut, he added. Dr Islam suggested the government to search options for depreciating the local currency and enhance the efficiency of the private companies for manufacturing high-valued products in their factories.

The BGMEA President said the major reason behind the fall of export growth in the last financial year (FY) 2014-15 was the Eurozone crisis.

He claimed that if the Euro is not depreciated and the European economic crisis is not prolonged, Bangladesh’s overall export could have been much higher than the achievement in the last FY.

In the last FY2015, Bangladesh recorded a 3.35 per cent export earnings growth at US$31.20 billion, latest government data showed.


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