A file photo shows containers at Chattogram port. Bangladesh Bank has observed that the overall impact of ongoing US-China trade war on Bangladesh’s external balance appears to be favourable. — New Age photo
Bangladesh Bank has observed that the overall impact of ongoing US-China trade war on Bangladesh’s external balance appears to be favourable.
The central bank also said that it was too early to assess the dynamic effect of US-China trade tension on Bangladesh economy.
But, US-China trade tension has raised concern as well as opportunity for many emerging economies including Bangladesh, the report said.
BB made the assumption in its quarterly Financial Stability Assessment Report for April-June-2018 released last week.
According to the Bangladesh Bank analysis, around 7 per cent of Bangladesh’s total export is identical and around 5 per cent is similar to the tariff-imposed Chinese products.
It means that around 88 per cent of Bangladesh’s aggregate current export is unrelated to Chinese products under US tariff, it pointed out.
As effective price of the identical and similar Chinese export products in US market would be higher, Bangladesh is likely to gain competitive advantage for this segment of export products, the central bank observed.
The projected advantage will, however, be subject to successfully addressing the issues like infrastructural changes, competition from other countries, financing readiness from financial sectors, skilled labour shortage and depreciation of Chinese currency yuan, it noted.
The competitive advantage on price may remain for other countries including Bangladesh assuming that yuan will not depreciate further, it said.
Bangladesh may lose its competitive advantage without depreciating the taka against the dollar, if China and other competing countries in the US market depreciate their own currencies.
Bangladesh is likely to gain from recent considerable devaluation of Indian rupee, the report said, adding that in particular, lower import price of cotton might help to boost RMG export.
If China reduces prices of its US tariff-imposed products to offset the tariff, Bangladesh’s domestic market will face tougher competition from China, though lower import cost will have beneficial effect on external balance, BB said.\
Source: New Age.
