Dhaka, Bangladesh
Bangladesh exporters to face stiff competition

EU cuts economic growth forecast

Bangladesh exporters to face stiff competition

News Report Bangladesh's exports will face stiff competition in the European markets as the European Commission in Brussels said on Thursday that euro area gross domestic product (GDP) is forecast to expand by 1.1 percent in 2019 and by 1.2 percent in 2020 and 2021, according to available sources. Compared with the projections the European Union's executive arm published in July, the growth forecast has been downgraded by 0.1 percentage points for 2019 and 0.2 percentage points for 2020. The European economy is in its seventh consecutive year of expansion, but the bloc now "looks to be heading towards a protracted period of more subdued growth and muted inflation," the commission said in a statement. Amid slump in ready-made garment (RMG) demand, Bangladesh's export income in the first four months of the current fiscal year (July 2019-June 2020) fell 6.82 percent year on year to nearly 13 billion US dollars, an official said Tuesday. According to Export Promotion Bureau (EPB) data Bangladesh fetched a total of 12,721.22 million US dollars from exports during July-October compared to 13,651.78 million in the same period a year earlier. Bangladesh shipped goods worth 3.07 billion US dollars in October, the 4th month of the current fiscal year, which was about 17.19 percent lower than the same month a year ago, said the official who preferred to be unnamed. In 2018-19, Bangladesh earned $40.53 billion by exporting goods and half of goods shipped to the EU markets during the same period. The overall exports beat the target by 4 percent with a 10.55 percent rise. The government has set an export target of $45.5 billion for 2019-20 fiscal year. Commerce Minister Tipu Munshi held a meeting at his office at the secretariat with leading readymade (RMG) exporters of the country to review the situation. He has urged the RMG exporters to explore new markets and diversify export- base to survive the stiff competition. He also said countries like China, India, Pakistan, Vietnam and Sri Lankan have devalued their respective countries to remain competitive in the international market. Tipu Munshi said the government is considering to give different incentives to exporters to help them survive the competition. Sluggish export performance in the first four months of the fiscal year has been attributed to poor demand for the country's ready-made garments in key global markets. Bangladesh set its export target for the whole 2019-20 fiscal year at 45.50 billion US dollars, including about 38.20 billion US dollars from RMG products, the EPB data showed. In the July-October period, Bangladesh earned 10.58 billion US dollars from garment exports with knitted items such as T-shirts growing 5.73 percent and woven items such as jeans falling 7.67 percent. Rubana Huq, president of the garment entrepreneurs' group BGMEA, called for policy support and more cash incentives to help the industry flourish. She pointed out that Bangladesh was failing to take the chance of US-China trade war, which has compelled many companies to withdraw from the Asian economic giant. "Sustained growth is not easy at this point. Vietnam is getting fair share of orders. Orders are being diverted to Pakistan and India as well. All these countries are offering incentives and privileges," she said. The BGMEA chief demanded that the government extend cash incentives, which is 1 percent for the sector now. "India is giving 4 percent cash incentives on goods export while we face criticisms over our 1 percent incentives," she lamented. "Perception about us is that we are doing well and that we are growing. If we take four years CAGR (compound annual growth rate), the growth is already dipping," she said. "In the absence of any other industry, we must make sure that RMG is sustained and nourished," Rubana remarked. She claimed many factories have faced closure after the hike in the minimum wage. "So, time to rethink about how we are going to go forward. Restrategising is the only answer. Policymakers must offer support," Rubana said. Policy Research Institute Executive Director Ahsan H Mansur agreed with Rubana on all but her call for increasing cash incentives. "It's impossible to push exports up by giving cash incentives. It's a wrong idea," he said. The BRAC Bank chairperson suggested devaluation of taka against dollar instead. "Our competitors China, India and Vietnam are doing this all the time. China devaluated its currency even yesterday. We must do it now," he said. Bangladesh's exports dropped because Europe, the major market for Bangladesh's RMG, is experiencing "a kind of economic recession", according to Mansur. The second reason behind the fall in exports is the rise in production costs against the prices exporters are getting. "And we haven't even devaluated our currency like our competitors have. We are falling behind on all fronts," he said. During the period, according to the official, knitwear garment export stood at 5.54 billion dollars while income from woven garments reached 5.04 billion US dollars. Earlier, Bangladesh suffered a reverse in export earnings in the first quarter of this year so much so that it has missed the target by 11 percent. It posted a 10.55 percent rise in FY2018-19. The country exported goods worth $9.65 billion in July-September period, which is 3 percent less than the amount received in the same period last year, according to Export Promotion Bureau data released in October. Apparel sector contributed most, 85 percent, to the exports as usual, but with a decrease of 1.64 percent missing the target as well by 11.52 percent. Export earnings continued to rise in July, with an increase of 8.5 percent than the same month last year. But it started decreasing in August with a drop of 11.5 percent than the same month last year. In last month, September, the country exported goods worth $2.9158 billion, which is 7.3 percent less than the amount earned in September last year. "The external environment has become much less supportive and uncertainty is running high. This is particularly affecting the manufacturing sector, which is also experiencing structural shifts," it said. The commission said trade tensions between the United States and China and high levels of policy uncertainty, especially with respect to trade, have dampened investment, manufacturing and international trade. "With global GDP growth set to remain weak, growth in Europe will depend on the strength of more domestically-oriented sectors," it said. Vice President of the European Commission for the Euro and Social Dialogue Valdis Dombrovskis said the bloc would face "troubled waters ahead," including "a period of high uncertainty related to trade conflicts, rising geopolitical tensions, persistent weakness in the manufacturing sector and Brexit." Top euro zone officials earlier said Germany and the Netherlands, which run budget surpluses, should invest more to help boost economic growth in their own economies and throughout the euro zone. Dombrovskis said he "urged" all member states with high levels of public debt to pursue prudent fiscal policies and "member states that have fiscal space should use it now." "All policy levers will need to be used to strengthen Europe's resilience and support growth," European Commissioner for Economic and Financial Affairs, Taxation and Customs Pierre Moscovici said. Meanwhile, Bangladesh's services exports have jumped to $6.35 billion in 2018-19 riding on 46 percent growth. The amount has also beaten the target of $5 billion by 26.77 percent. In 2017-18, Bangladesh earned $4.34 billion from services exports. In June this year, export earnings from services sector were $920 million, which is 91 percent more than the earnings made in June last year. Earnings from goods exports grew by 10.55 percent to $40.53 billion, beating the target by 4 percent last fiscal year. Finance Minister AHM Mustafa Kamal, in his budget speech on June 13, spoke of his satisfaction at the rise in services exports and hoped it will grow further. Commerce Minister Tipu Munshi has also said the government "strongly" believes Bangladesh will be able to achieve the target of exporting goods and services worth $60 billion annually by 2021.

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