Friday, June 21, 2024

Terms of trade likely to worsen further: UO

The country’s terms of trade have deteriorated and likely to worsen further if radical actions are not taken, local think-tank Unnayan Onneshan has said.
The value of exports relative to that of imports reached at 70.1 per cent in the financial year 2011-12 from 70.8 per cent in the FY11, it said in an economic report, published on Saturday. If the present trend continues, the terms of trade will be at 69.2 per cent, 68 per cent, 66.7 per cent and 65.5 per cent in the FY13, FY14, FY15 and FY16 respectively, it said.
The think-tank observed that the deterioration of terms of trade was the reflection of a major structural weakness of the economy.
Referring to the major seven low-value export items, the research organisation said that the export of woven garments, jute goods increased slightly in the FY13 compared to the previous FY12 but the export of frozen food, knitwear, raw jute, chemical products, engineering and electric goods, and tea witnessed a decline.
On the other hand the main four import items — crude petroleum, raw cotton, capital machinery and iron, steel and other base metals — are comparatively high-value industrial goods, the report said.
UO observed that the economy experienced a negative balance of trade over the years as there was a grater fall in import than that in export.
The report said that the trade deficit declined to $7010 million in the FY13 from $9310 million in the FY12.
It projected that the trade deficit might decline to $2494.33 million in the FY14 and to $2667.71 million in the FY16 if the recent business scenario remained as usual.
The economic report said that the country recorded a trade surplus of $2,525 million in the FY13 against $447 million deficits in the FY12 as import payment decreased to $34083.6 million in the FY13 from $3,5516.3 million in the FY12.
The think-tank pointed said, ‘Surplus achieved through reducing import of raw materials and capital machinery for its industrial sector may not be considered a blessing and this surplus has also appreciated the national currency, leading to loss in export competitiveness.’
The import of raw materials and capital machinery declined to $6408 million in the FY13 from $11268 million in the FY12, making a negative growth of 43.13 per cent, report added.
The research organisation also observed that the portfolio investment decreased to $110 million in the FY13 from $198 million in the FY12 with a 44 per cent negative growth while the net foreign direct investment decreased to $750 million in the FY13 from $995 million in the FY13 with a 24.6 per cent negative growth.
To stave off further deterioration of terms of trade, UO suggested the government for coordinated monetary and financial policies, subsidies and tax breaks to embark upon technological catching up and manufacturing high value-added products.

-With New Age input

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