Inflation in the Economy of Bangladesh - MPM104

Presentation Topic is : Inflation Situation in The Economy of Bangladesh.

Topic Covered:
• INFLATION
• REASON OF INFLATION
• TYPES OF INFLATION
• CAUSES OF INFLATION
• IMPACT OF INFLATION IN
INTERNATIONAL ECONOMY
• GLOBAL REVIEW OF INFLATION
• INFLATION OUTLOOK IN BANGLADESH
• MEASURES TO CONTROL INFLATION
• PEOPLE & LOCAL MARKET REVIEW IN
BANGLADESH

1. Inflation in The Economy of Bangladesh Master of Professional Marketing (MPM) Economics for MANAGERS

2. Inflation in The Economy of Bangladesh 2 INFLATION REASON OF INFLATION TYPES OF INFLATION CAUSES OF INFLATION IMPACT OF INFLATION IN INTERNATIONAL ECONOMY GLOBAL REVIEW OF INFLATION INFLATION OUTLOOK IN BANGLADESH MEASURES TO CONTROL INFLATION PEOPLE & LOCAL MARKET REVIEW IN BANGLADESH

3. INFLATION A state of an economy, wherever general price level constantly going high & high. And it is the situation in the economy where too much money chases too few goods. Price of goods and service will be constantly going high & high. Supply of money will be more in the market. And value of money will be reduced. Inflation in The Economy of Bangladesh 3

4. REASON OF INFLATION A Rise in Demand A Short in Supply Natural Calamity Fiscal Policy of the Government Deficit Financing of the Government The Role of Banks & Financial Institutions in the economy High Profit Motive by the business people Extortion Surplus in the International Balance of Payments Inflation in The Economy of Bangladesh 4

5. TYPES OF INFLATION Inflation in The Economy of Bangladesh 5

6. CAUSES OF INFLATION Inflation in The Economy of Bangladesh 6 Demand-Pull Inflation Demand-pull inflation occurs when the demand for goods and services exceeds their supply. Economic Growth Monetary Policy Fiscal Policy Population Growth Cost Push Inflation Cost-push inflation happens when the costs of production increase, leading to higher prices for finished goods and services. Wage Increases Increased Raw Material Costs Supply Chain Disruptions Currency Depreciation

7. IMPACT OF INFLATION IN INTL. ECONOMY Exchange Rates Inflation can influence exchange rates between currencies. If it is higher affect international trade competitiveness and the balance of trade. Interest Rates Higher inflation may lead to central banks raising interest rates to curb spending and cool down the economy. Conversely, lower inflation might prompt central banks to lower interest rates to stimulate economic activity.   Trade Balance By affecting the prices of imports and exports. If a country experiences higher inflation than its trading partners, its exports may become relatively more expensive, leading to a decrease in export competitiveness.   Investment C an encourage or discourage long-term investment as investors may be uncertain about future returns. Inflation in The Economy of Bangladesh 7

8. IMPACT OF INFLATION IN INTL. ECONOMY Global Economic Stability: C an contribute to global economic imbalances and instability. Large disparities in inflation rates can lead to currency fluctuations, trade imbalances, and financial market volatility.   Policy Coordination: Central banks and governments may engage in dialogue and coordinated action to address inflationary trends, stabilize exchange rates, and promote global economic stability.   Debt Dynamics: Moderate inflation can reduce the real burden of debt, making it easier for governments and borrowers to service their debts. However, high inflation rates can erode the value of fixed-income assets and savings, potentially leading to financial instability and debt crises. Inflation in The Economy of Bangladesh 8

9. GLOBAL REVIEW OF INFLATION 2020 | Initial Dip: The COVID-19 pandemic caused a drop in demand, leading to a decline in global inflation to around 3.25%.   2021 | Rebound and Supply Chain Issues: As economies reopened, demand surged faster than supply could keep up. Supply chain disruptions caused by the pandemic and other factors pushed inflation up to 4.7%.   2022 | Surge due to Geopolitical Events: The war in Ukraine further disrupted supply chains, particularly for energy and food. This, combined with ongoing demand pressures, sent inflation soaring to an estimated 6.9% globally.   Inflation in The Economy of Bangladesh 9

10. GLOBAL REVIEW OF INFLATION (Cont.) 2023 | Central Bank Response: To combat high inflation, central banks around the world raised interest rates. While inflation remained elevated, it showed signs of slowing down, reaching around 6.8% Cautious Optimism: There are positive signs! Inflation is declining faster than expected, with an estimated global average of 5.9% due to easing supply chain issues and tighter monetary policy   Inflation in The Economy of Bangladesh 10

11. INFLATION Situation IN BANGLADESH Inflation Trends High Inflation Rates: Bangladesh experienced significant inflation, averaging 9.07% in FY2022-23, up from 5.56% in FY2020-21. Point-to-Point Inflation: Reached 9.81% in March 2024, compared to 5.47% in March 2021. Pre-Pandemic Comparison: Inflation was 5.48% in FY2018-19. Inflation in The Economy of Bangladesh 11 Causes and Challenges Global Influences: High international food and energy prices in 2021 contributed to worldwide consumer price inflation. Domestic Issues: Despite the decline in international prices in 2023, Bangladesh's domestic prices remained high due to policy and institutional failures. Monetary Policy: The Bangladesh Bank's interest rate cap in April 2020 and its later removal in FY2023-24 with the SMART reference rate implementation had limited effect on controlling inflation.

12. INFLATION Situation IN BANGLADESH Socio-Economic Impact Vulnerable Populations: Poor and low-income households suffer most, struggling with high food and fuel prices. Income and Employment: The pandemic-induced job losses and wage compromises have exacerbated the economic strain on households. Poverty and Inequality: World Bank projections indicate a rise in extreme poverty and moderate poverty between FY2022-23 and FY2023-24. Inflation in The Economy of Bangladesh 12 Policy Responses and Recommendations Monetary and Fiscal Policy: Prudent fiscal management and sound monetary policy are essential to curb inflation and protect purchasing power. Social Protection: Strong social safety nets, such as direct cash transfers and affordable essential commodities, are critical to support vulnerable groups. Targeted Measures: Social programs must be adequately funded, well-targeted, and efficiently managed to avoid wastage and corruption.

13. MEASURES TO CONTROL INFLATION Social protection measures for the vulnerable: Direct cash transfers: Providing money directly to low-income families can help offset the rising cost of essentials. Subsidized essential goods: Increasing the availability of essential commodities like food and fuel at affordable prices through government programs can offer immediate relief. Strong fiscal and monetary policies: Prudent fiscal management: This involves controlling government spending to avoid putting more money into circulation and fueling inflation. Sound monetary policy: The Bangladesh Bank needs to implement effective measures to control the money supply and interest rates. The article mentions the ineffectiveness of past attempts and suggests a more comprehensive approach. Inflation in The Economy of Bangladesh 13

14. People & Local Market Review in Bangladesh 1. Inflation Overview: General Inflation Surge: Reached 9.86% in January 2024, up from December 2023. Non-Food Inflation: Increased by 10.6%, reaching 9.42%. Food Inflation: Slightly decreased month-on-month to 9.56%, but up 23% year-on-year. 2. Energy Costs: LPG Price Increase: National average price rose to BDT 1,433 per 12 kg cylinder, up by BDT 29. Increased by BDT 40, reflecting ongoing dollar and fuel crises. 3. Food Commodity Prices: Basic Food Commodities: Prices of cereals, proteins (poultry, eggs, fish), and some vegetables increased. Decreased Prices: Potato, onion, and green chili prices fell. 4. Import Trends: Rice Imports: None in the first seven months of the fiscal year. Wheat Imports: More than doubled year-on-year, with total imports up by 26%. Inflation in The Economy of Bangladesh 14

15. People & Local Market Review in Bangladesh Cost of Food Basket: National Decrease: Typical food basket cost fell by BDT 95, despite rising commodity prices. Adjusted basket cost reduced by BDT 30. Protein Sources: Price Increase: Broiler chicken and fish prices rose nationally; similar trends in Cox’s Bazar. Egg Prices: Dropped by 5% to external crises. Inflation in The Economy of Bangladesh 15

16. Fresh Foods and Vegetables: Garlic Prices: Increased by 13% nationally. Onion and Potato Prices: Decreased significantly Economic Challenges: Inflation Resurgence: Reflects ongoing economic pressures. Energy and Food Prices: Continued fluctuations due Inflation in The Economy of Bangladesh 16 People & Local Market Review in Bangladesh

17. Inflation in The Economy of Bangladesh 17 Local Interviews

18. THANK YOU Inflation in The Economy of Bangladesh 18