The shortfall is the outcome of weak economy, say economists
The country’s trade deficit dropped by 3.50% year-on year to $3.71 billion in the first quarter of the current fiscal year, due to negative growth both in import and export fronts.
According to the central bank data released on Thursday, trade deficit dropped to $3.71 billion in July-September period of the current FY20 against $3.85 billion in the same period last year.
“The drop in trade deficit was due to declining trend in export and import during the period that indicates a weak economy,” said Policy Research Institute of Bangladesh Executive Director Ahsan H Mansur.
He said the situation was not good for the economy. Such slowdown in the economy would ultimately lead to a sluggish investment and less job creation, Ahsan, also the BRAC Bank Chairman, added.
In July-September period of this year, imports fell by 2.55% to $13.25 billion against $13.59 billion in the same period last year.
On the other hand, exports fell by 2.18% to $9.53 billion during the period from $9.74 billion in the same period of FY19. The apparel export fell by 1.64% to $8.05 billion, according to the BB data.
Talking to Dhaka Tribune, Zahid Hussain, former lead economist of World Bank, Bangladesh said the deficit narrowed due to the negative import growth, as all types of import including industrial capital machinery declined during the first quarter of the current fiscal year, he added.
“The overall import, particularly those of capital machineries and raw materials are the fundamental basis for local industrialization, which subsequently transforms into enhanced export earnings for the economy,” said Zahid Hussain.
He said that export earnings also declined, suggesting that the overall business was facing headwinds.
The current account balance and overall balance turned negative compared to a month ago. As a result, there would be more pressure on foreign exchange reserve in the coming days, he pointed out.
According to the data, the current account balance turned negative by $678 million in September from positive of $260 million in August.
According to the Bangladesh Bank data, the country received $1.10 billion in foreign direct investment in September of the current fiscal year against $1.03 billion in the same month last fiscal year.
As of October this year, foreign exchange reserves stood at $32.43 billion, up from $32.07 billion a year earlier.