The scarcity of fuel is currently posing a serious threat to Bangladesh’s economy since it is causing industrial operations to be disrupted. According to a World Economic Forum (WEF) assessment, in addition to other threats including growth slowdown, rising wealth and income gap, higher government debt, and unemployment, rising high inflation also poses harm to the economy.
The World Economic Forum (WEF), which has its headquarters in Davos, Switzerland, disclosed the threats in its Global Risk Report 2024, which was made public on Wednesday. The WEF’s 54th Annual Meeting will take place in Davos-Klosters from January 15–19.
The WEF analysis identified specific concerns for several countries, including Bangladesh, in addition to discovering the overall risk factors for the global economy.
The WEF released the Global Risk Report 2024 several days after the World Bank predicted in its biannual report on Global Economic Prospectus that global economy will see the lowest growth in 2024 since the coronavirus pandemic passed.
The WEF identified global risk in short term and long term. The 10 main global risks in the short term (2 years) are: misinformation and disinformation; extreme weather events; societal polarization; cyber insecurity; interstate armed conflict; lack of economic opportunity; inflation; involuntary migration; economic downturn and pollution.
The non-government research organisation Centre for Policy Dialogue (CPD) worked as the local partner of the WFP, and the list of risks were assessed by conducting survey on 71 companies.
According to CPD research director Khandaker Golam Moazzem, a survey of businesses revealed that one of the biggest hazards they face right now is a gasoline scarcity. It has been discovered that 60% more gas is being provided than is needed overall, which is interfering with output in sectors like steel, textiles, and ceramics that rely on gas.
It has been learned that the authorities concerned are rationing gas supply to factories due to shortage of gas. Export-oriented industries are getting the gas, but small and medium enterprises are not receiving it as per their demand. The government cannot ensure gas supply even after raising the gas price although they said while hiking the gas price that there would be uninterrupted gas supply.
Besides, power traffic hike also increased the production cost in industries, according to the WEF report.
As per the Global Risk Report, the second biggest threat to businesses in Bangladesh is inflation. Khandaker Golam Moazzem said inflation affects directly and indirectly. The immediate effects of inflation are a rise in the demand for pay increases and a decline in people’s purchasing power; the indirect effects are uncertainty for businesses regarding long-term investments due to high inflation. He said that rising inflation also affects the trade balance, the opening of letters of credit, and the exporters’ ability to compete in the export market.
Unlike the previous year, this time businesses mentioned disparity in both income and wealth posing a risk to economy. Regarding this, Khandaker Golam Moazzem said the issues have been discussed across the globe and businesses in Bangladesh have understood its importance.
If high income inequality exists purchasing power of low-and middle-income people does not rise that much. The problem is when the high-income people accumulate money and wealth they do not spend much of that additional money. Many even spend money aboard. But, the middle class is the main consumer of the society, and if their income does not rise expansion of the economy slows, he added.
Analysts say high inequality results in social instability. Workers’ movement demanding wage hike intensifies. Many analysts observe high inequality becomes a barrier to economic growth at on stage.
Bangladesh will fall short of achieving the Sustainable Development Goals (SDGs) because of a lack of funding, according to the Global Risk Report. Bangladesh must invest USD 400 per person by 2030 to meet the SDGs, although the WEF estimated that this amount might increase to USD 230 per capital over this time.
The main danger to the economy is not only unemployment but also the growing national debt. According to WEF research, a rise in public debt prevents investment by delaying the flow of credit to the private sector. Businesses have already expressed their resistance to it. The amount of government debt increases in lockstep with bank lending rates.
Golam Moazzem of CPD stated that returns from a particular project decrease when the project’s budget is altered and its implementation pace slows down. Once more, he said that investors do not want an unstable macroeconomic environment brought on by an increase in government debt.
Previously, businesses identified five main risks to the economy of Bangladesh. Those were: high inflation, debt crisis, impact of high prices, manmade environmental damage and geopolitical competition over resources.
