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The Global Financial Crisis: Impact on Bangladesh

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DRAFT

COUNTRY CASE STUDY

THE GLOBAL FINANCIAL CRISIS: IMPACT ON BANGLADESH

K.A.S. Murshid

BROTEE

July 19, 2009

The author would like to gratefully acknowledge the contribution of Dr. Anwara Begum, Research Fellow, BIDS and Mr. Zabid Iqbal, Research Associate, BIDS. The author is a Research Director, BIDS.

EXECUTIVE SUMMARY (TBC)

I Introduction

The world economy is currently experiencing the worst global financial crisis since the Great Depression. While major world economies have taken a massive hit resulting in negative growth rates in key countries or regions, including the US, EU and Japan, the contagion also spread to emerging developing countries like China, Brazil, India and South Africa, as well as to the countries of South East Asia and Latin America. The magnitude of impact seems to depend on the extent of integration with the rest of the world (or to use World Bank jargon, the extent of liberalization that has taken place). The impact on LDCs like Bangladesh has been muted in the first, and even the second round. However, there is growing evidence that third round impacts are making themselves felt, manifested in declining exports, declining migration of labour, growing number of sick industries, industrial unrest, and reduced growth. There are also fears that poverty and unemployment may be exacerbated and MDG targets could become jeopardized.

Countries like Bangladesh are interested in understanding the socio-economic impact of the global financial and economic crisis as well as policy options to cope with emerging challenges. This study addresses itself to the task of assessing the unfolding impact of the GFC on Bangladesh. There is a consensus that the chief transmission

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