The frantic slowdown of global economies and businesses has caused significant consequences for income inequality since the global financial crisis of 2007-08, crippling common people. This grim picture of global trade and businesses is starkly reflected in the World Trade Report 2024, recently released by the World Trade Organization (WTO), expressing utmost concern over the downturn in global trade growth and the rise of protectionism.
The report states, "Never before have the living conditions and prospects of so many people changed so dramatically in the space of a few decades." It adds, "Growing concern about income inequality levels, which remain high in most economies, has led some to argue that globalisation is detrimental to development and inclusiveness, leaving marginalised groups and regions behind. Income convergence has progressed over the last 30 years, but it has slowed since the global financial crisis of 2007-08 and took a backward step during the COVID-19 pandemic."
In her executive note, WTO Director-General Dr Ngozi Okonjo-Iweala said, "I hope that readers and especially policymakers will take to heart the lessons from this report. Maintaining open and predictable rules-based trade should be part of any countrys path to greater inclusiveness. There is no substitute for complementary domestic policies: to make trade work for more people, the wider economy needs to work for everyone. And we need strong and renewed political support for multilateral cooperation to make trade work for all."
Believably, under the shadow of global financial crisis, the business economy of Bangladesh was haunted by so-called 21-family conglomerate influence might exercise after the countrys independence in 1971. And now, it is being haunted by newly emerged business group. According to a Daily Observer report (Jan 25, 2025), 13 business groups have defaulted bank loan of Tk 60,000 crore.
The ongoing global economic slowdown continues to impact economies worldwide, with smaller nations bearing the brunt of the consequences. Public discontent is escalating, and social repercussions are becoming increasingly evident. This downturn is impulsive in nature, leading to widespread challenges. The WTO emphasises the need for multilateral cooperation to mitigate the impact of the slump, calling for trade reforms, enhanced supply chain resilience, and efforts to restore confidence in the global economy to aid recovery.
Unemployment, shrinking incomes, and unstable prices of essentials are among the most apparent signs of economic stagnation, sparking public unrest. This pattern, observed since the pre-civil war period, the Cold War, and both World Wars, continues to echo throughout global history.
The global slowdown has hit Bangladesh particularly hard, affecting its economy through a reduction in export demand, inflationary pressures, and a decline in remittances. As a major exporter of garments, the country has seen a decrease in orders from key markets like the US and the EU due to waning consumer spending. Foreign direct investment (FDI) to Bangladesh has also been hindered by global uncertainty, stalling growth in key sectors such as infrastructure and manufacturing.
The roots of the global economic slowdown are multifaceted. The lingering effects of the COVID-19 pandemic, combined with inflationary pressures exacerbated by the Ukraine conflict and Gaza war, have disrupted global supply chains and driven up energy costs. Geopolitical tensions, especially between major economies like the US and China, have further complicated global trade and investments.
This global recession has been further fuelled by events such as the pandemic, the war in Ukraine, and the ongoing Israeli-Palestinian conflict all of which have devastated smaller economies like Bangladesh. This situation echoes the economic disarray witnessed during the 2007-2008 financial crisis. In this context, Bangladeshs central bank, Bangladesh Bank, has warned of a short-term economic downturn, highlighting both internal challenges and external disruptions caused by global events. Despite the government's efforts to stabilise interim governance through electoral reforms, the immediate outlook remains difficult. The central bank has warned that the country faces a challenging road ahead, despite the potential long-term benefits of these reforms.
In its most recent quarterly report (JulySeptember), Bangladesh Bank acknowledged that both domestic and international factors have hindered the countrys economic stability. The World Bank has forecasted a modest growth rate of just 4.1% for the 2024-25 fiscal year, marking a sharp decline from previous years. Key factors contributing to this slowdown include political instability, inflation, and disruptions in vital sectors such as agriculture, industry, and services.
Three leading indicators declining copper prices, an inverted US yield curve, and depressed shipping rates are signalling a potential slowdown in global economic growth.
The Interim Government in Bangladesh has warned of a possible recession due to stagnant private investment and a sluggish public sector. At the Executive Committee of the National Economic Council (ECNEC) meeting held on 25 November, the Planning Adviser of the Interim Government underscored that continued stagnation in private investment and public sector development expenditure could lead to a recession.
The International Monetary Fund (IMF) has stated that global growth will remain weak by historical standards, with inflationary pressures and the ongoing war in Ukraine weighing heavily on economic activity. The ongoing supply chain disruptions and escalating political uncertainty continue to strain the governments ability to provide essential public services and maintain good governance.
The drastic shifts in global politics, most notably the pandemic and the war in Ukraine, have severely disrupted international markets, compounding difficulties for developing economies. Bangladesh has borne the brunt of these global shocks, which have had a devastating impact on its economy.
The war in Ukraine, which began in 2022, aggravated the crisis by disrupting energy and food markets particularly oil, gas, and grain further exposing Bangladeshs vulnerability to price fluctuations. The countrys dependence on imported energy and food staples has put additional pressure on its fragile economy, which has been struggling with low Annual Development Programme (ADP) growth and weak economic linkages in sectors such as transport and tourism.
To combat rising inflation, central banks in advanced economies have raised interest rates, leading to capital flight from emerging markets. As a result, many developing economies, including Bangladesh, have experienced currency depreciation. A weaker currency makes imports more expensive, intensifying inflation and eroding consumer purchasing power. This devaluation has deepened the economic challenges facing Bangladesh.
Ironically, despite impressive growth over the past few decades, Bangladesh now finds itself struggling to maintain this momentum. Key sectors such as agriculture, industry, and services have been severely disrupted. Natural calamities, particularly the devastating floods of August and September 2024, damaged crops, infrastructure, and communications in more than 11 districts, further destabilising the economy.
The garment sector, a crucial driver of export revenue, has also suffered irreparable setbacks, including order diversions and shipment failures. A decline in demand from key markets such as the US and Europe has significantly impacted Bangladeshs export performance. Inflationary pressures and higher interest rates in these economies have reduced consumer spending, further dampening demand for Bangladeshi products.
The agricultural sector, which is vital for food security and employment, faces its own set of challenges. The countrys reliance on imported food staples like wheat and fertilisers has exposed it to sharp price increases in global markets. As a result, food inflation continues to surge, driving up the cost of living, particularly for the lower and middle classes.
According to Bangladesh Bank data, inflation reached a record high of 11.66% in July 2024 and remained at 9.92% by September 2024. The rising costs of essential food items such as rice and lentils are placing immense strain on household budgets, particularly in rural areas.
Moreover, Bangladeshs reliance on foreign debt has put the country in a precarious position. Rising interest rates have increased borrowing costs, making it more expensive for the government to finance infrastructure and public projects. With growing debt servicing obligations, there is less fiscal space to invest in key areas such as education, healthcare, and social welfare. This limits the governments ability to provide essential services to vulnerable populations in rural areas.
The global slowdown has also affected remittances, a crucial source of income for Bangladesh. Job opportunities for migrant workers, mostly in the Middle East and Southeast Asia, have declined, resulting in fewer remittances being sent home. This has had a ripple effect, particularly in rural areas, where remittances play a significant role in supporting local economies and households.
The political instability surrounding the upcoming Jatiya Sangsad election (scheduled for late 2025 or early 2026) has exacerbated the situation. Structural issues, such as corruption and inefficiency in public institutions, remain unresolved, contributing to the overall sense of uncertainty.
During both World Wars and the Cold War, small economies faced significant challenges, often heavily reliant on international trade that was disrupted by the wars. Many small nations adopted strategies such as increased state intervention and the diversification of domestic industries to address these disruptions.
In World War I (1914-1918), global trade was severely impacted as military mobilisations led to blockades and shipping routes were disrupted. Small economies, mostly in Europe and the colonies, struggled to maintain trade links. In response, governments nationalised key industries and focused on agricultural self-sufficiency. Similarly, during World War II (1939-1945), small economies used state intervention to direct resources towards war production and recovery.
These wartime strategies, such as government intervention, resource rationing, industrial retooling, and international aid, offer valuable lessons for todays small economies, including Bangladesh.
Despite the numerous challenges, Bangladesh has a history of resilience. By implementing the right policies boosting domestic industries, strengthening social safety nets, improving fiscal management, and ensuring political stability the country can streamline its way through the current crisis. With strategic reforms and determination, Bangladesh can continue to build on its past successes and overcome the challenges ahead, ensuring its future prosperity despite the ongoing global economic slowdown.
The writer is a journalist with The Daily Observer
