Published in New Age on Wednesday, 17 September 2014.
Trade surplus in July but brings no cheers for economy
AKM Zamir Uddin
The country posted a trade surplus of $195 million in July, for the first time in the last 14-15 years, but worries remained over the state of business situation as both export earnings and import payments dipped in the month, said Bangladesh Bank officials and economists.
The export earnings stood at $2.96 billion in July, the first month of the FY15, against the import payment of $2.77 billion, showed BB data released on Tuesday.
‘This is for the first time in last 14-15 years, we have seen a figure of trade surplus instead of trade deficit as the export earnings’ figure was higher than the import payment figure in July,’ said a high official of BB. The trade deficit in July last year was $129 million.
He, however, said that both export earnings and import payments were lower in July compared with the same month of the previous year. ‘
The country posted trade surplus as the rate of decline in import payments was higher than the rate of drop in export earnings. Ideally, it would have been better that the export earnings were growing faster than the import payments,’ he said.
Export earnings in this July were 1.03 per cent lower than $2.99 billion in July last year while import payments were 11.36 per cent lower than $3.12 billion.
Economists said that the trade surplus, riding on both lower exports and imports, was not a good sign for the country’s macroeconomic situation.
BB officials said that sluggish economic activities amid political uncertainty was hindering both export and import sectors.
‘The investors and business community are yet to regain their confidence to expand their business following the one-sided elections in January. They are still following a cautious policy to import industrial raw materials and capital machinery as they fear that the political unrest may comeback anytime,’ said an official.
Bangladesh Institute of Development Studies research director Zaid Bakht on Tuesday told New Age, ‘The trade surplus is usually considered a good sign for any country, but it will not bring any positive impact to the country’s economy because of drop in both exports and imports.’
‘It is highly worrisome for the country’s business sector that the imports have not picked up in accordance with the expectations,’ Zaid said.
Private think-tank Centre for Policy Dialogue’s executive director Mustafizur Rahman also said that the trade surplus would not bring much positive impact because of slide in exports and imports.
‘The country’s export sector is badly hit as the US has started to shift its regular ready-made garments import from Bangladesh to other countries after the Rana Plaza collapse. The countries like Vietnam and Cambodia are making more strides in the US market,’ he said.
‘The flagging import sector also shows that the export sector is struggling,’ he said.
The country should use properly its regional opportunity to increase the export volume, said Mustafiz.
The BB data showed that the current account balance increased by 77.60 per cent in July compared with the same period of the FY14 due mainly to a higher growth in remittance inflow in the month.
The current account balance was $1.02 billion in July of the FY15 against $576 million in the same period of the FY14.
The net foreign direct investment increased by 10.81 per cent to $123 million in July from that of $111 million in the same period of the FY14.
The BB data, however, showed that the financial account in the country’s balance of payments posted a deficit amount of $362 million in the first month of the FY15 from a deficit amount of $473 million during the same period of the FY14.
The financial account includes foreign direct investment, portfolio investment, and medium- and long-term loans.