DCCI concerned over economic impact on BD

Dhaka Chamber of Commerce and Industry (DCCI) has expressed grave concern over the potential economic impact on Bangladesh due to the current geopolitical tension and escalating military conflict between the United States, Israel and Iran in the Middle East region.

The DCCI said the ongoing conflict has already started causing turbulence in the global energy market, trade routes and financial system.

"Bangladesh, being a highly import-dependent economy, is very susceptible to external shocks as a result of such conflicts," said the DCCI in a statement issued on Wednesday.

"The conflict has largely destabilised the energy market and maritime commerce across the globe. Oil prices in the international market have gone beyond USD 100 per barrel due to the supply being cut in the Middle East which contributes to a large proportion of the oil and LNG exports in the world," it said.

The DCCI called upon the government to develop active policy measures in order to protect the economy including build-up of strategic fuel reserve, diversification of the energy sources of import, ensuring smooth supply chain logistics and the close liaison between the government agencies, financial institutions and the business community.

DCCI also emphasised the importance of diplomatic efforts to promote global peace and stability as long-lasting geopolitical conflicts can be extremely dangerous not only to global trade but also to the economic stability of developing nations like Bangladesh.

It also cautioned that the external sector in Bangladesh might be under extreme strain with a continuous rise in oil prices worldwide.

"It is estimated that every USD 10 increase in global oil prices could elevate the monthly import bill of Bangladesh by about USD 70-80 million, and this would lead to the expansion of the trade deficit. Besides increasing energy prices, the war has interfered with major shipping routes especially the Strait of Hormuz which is the route of almost 20 percent of global oil and gas supply," it maintained.

The DCCI believes that such a long-term interference can greatly raise the freight rate, insurance cover and delivery periods of import and export of Bangladesh.

It further said that the export-driven industries in Bangladesh, particularly RMG industry will be exposed to an increase in logistics cost, delay in supply chain and the shipping risks.

"The export of Bangladesh is also falling over the past 7 months because of domestic political and economic obstacles. Although uncertainty prevails on the global front, there has been some short-term relief in terms of the energy supply in Bangladesh as per the recent development. More than 10 vessels with LNG, LPG, diesel, and other fuel have arrived at Chattogram Port, contributing to stabilising the immediate energy supply situation in the country," it continued.

Mentioning the current military conflict in the Middle East as extremely unpredictable, the DCCI said if this conflict escalates or expands, Bangladesh might start experiencing a series of macroeconomic problems, such as rising fuel and electricity production costs, high inflation rate caused by the high cost of transportation and production, strain on foreign exchange reserve, and the possible disruption of remittance inflows from the Middle East.

talhabinhabib@yahoo.com