On new export earnings target

After a predictable setback in the country's export earnings in the last fiscal year, the interim government has set a fresh target for the current fiscal year (FY25). The new total export target is set at US$57.50 billion, a figure that carries significant weight as it is 13.30 per cent higher than the actual receipt of FY24. Of this, $50 billion is targeted as earnings from exports of goods and the rest from services.

It is to be noted that the country fetched $44.48 billion in exports of goods in the last fiscal year, which was 4.34 per cent lower than the earnings of exports in FY23. Again, the actual receipt in the previous fiscal year missed the original target of $62 billion by 39 per cent. Overambitious targets, coupled with the manipulation of data to artificially inflate the export earnings by the ousted autocratic government, result in a big gap between the targeted and actual figure. The manipulation of data on export earnings also provided a distorted scenario of the country's external trade and overall balance of payments (BoP).

After adjusting the export data, initially provided by the Export Promotion Bureau (EPB), which counted export earnings in some cases inflating the figure, it was found that there was an overestimation of around $9 billion in FY23. This underscores the crucial need for accurate and honest reporting, as the EPB data put the export earnings at $55 billion in FY23, which came down to $46.50 billion after the adjustment. Thus, there was an overestimation of around 16 per cent of the export receipt.

However, the new export target is fixed taking into consideration the adjusted figure of the export earnings. So, the figure was low compared to the indicative target set by the Hasina regime. The Cabinet Committee on Economic Affairs (CCEA) in May last approved the draft of the Export Policy 2024-2027, eyeing a $110 billion export target in FY27 based on an inflated figure.

A valid question in this connection is how feasible the new merchandise export target of $50 billion, set by the interim government in the second week of this month, is. This piece will try to find the answer, taking both external and internal factors into consideration.

To understand the external factor, a quick look at the current trend of global trade is necessary. Around three months ago, UN Trade and Development (UNCTAD) released its global trade update, which showed that the current international trade trends have turned positive. This positive trend, with trade in goods increasing by around one per cent quarter over quarter (QoQ) in the first quarter of 2024, and services trade growing at approximately 1.5 per cent on the same count, brings a sense of optimism.  The UNCTAD predicted a stronger positive trend for Q2 in 2024, projecting an approximate 2 per cent increase for the first half of 2024.

The UN body also estimated that the growth would add around US$250 billion to trade in goods and about US$100 billion to services trade in the first half of the current year compared to the second half of 2023. Moreover, if positive trends persist, global trade in 2024 could reach almost US$32 trillion, though it is unlikely to surpass its record level seen in 2022. 

Now, in the first week of this month, the World Trade Organization (WTO) released the latest reading of its Goods Trade Barometer, which is a composite leading indicator for world trade. It revealed that global merchandise trade has been picking up in the third quarter of 2024 after demand for traded goods stalled in 2023 amid high inflation and rising interest rates. In other words, global trade in goods is on the rise in the current year, as predicted by UNCTAD earlier. The reading of the WTO trade barometer also showed the possibility of continuing the rising trend. Taking a cue from these projections, there is hope for Bangladesh, no doubt, as the last half of the current calendar year is also the first half of the current fiscal year.

Nevertheless, according to the WTO barometer, the outlook for trade remains highly uncertain due to four downside factors. These are: rising geopolitical tensions, ongoing regional conflicts, shifting monetary policy in advanced economies, and weakening export orders. All these may severely subdue Bangladesh's export potential in the first half of the current fiscal year.

The Russia-Ukraine war has been continuing for two and half years. Israel continues to pound the Gaza Strip to uproot Hamas militants for almost a year, killing more than 41,000 Palestinians. Though its goal is yet to be achieved, the Zionist state is now going to launch a big offensive in Lebanon to fight Hezbollah, meaning the Middle East will become more volatile. These two key regional conflicts have already disrupted the global supply chain, and continuing the conflicts at a bigger scale will make things worse soon.

The looming presidential election in the United States (US) has become a matter of tension across the world, especially when Donald Trump is the candidate from the Republican camp. Winning Trump would mean escalating geopolitical tension and proliferating a trade war.

On the domestic front, the first quarter of the current fiscal year is marked by serious disruption of economic activities in the country for obvious reasons. The anti-discrimination movement launched by the students in July to reform the quota system in the public sector turned into a mass uprising against the Hasina regime. The movement forced Sheikh Hasina to step down and flee the country to take shelter in India.

Though an interim government under the leadership of Nobel Laureate Professor Muhammad Yunus has taken charge, the overall situation is still volatile. Several ready-made garments (RMG) and other factories were vandalised and faced labour unrest. Production has not fully resumed in all the industrial units. Imports are also slow, as many banks have been short of funds due to gross irregularities. Some big corporate entities, known for their strong affiliation with the ousted prime minister and mobilised big funds from the banks bypassing the rules, are in trouble now. So, the overall economic activities, including exports in the current fiscal year's first quarter, are undoubtedly dull.   However, the situation is expected to start to recover in the second quarter, leading to a gradual rise in exports.

Thus, export earnings in the first half of the current fiscal year will grow moderately under the current trend in global and local factors. This will make achieving the target by the end of the fiscal year challenging.

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