Potential Gains for Bangladesh Amidst a Weakening US Dollar
Bangladesh stands to gain from a weaker dollar due to lower import costs and increasing opportunities in the apparel market, as US tariffs drive buyers away from China. The country experienced a 45.93% growth in apparel exports to the US year-on-year in January 2025. Expectations of lower borrowing costs may also provide stability to the Taka, although rising inflation poses a risk to export orders.
The depreciation of the US dollar brings both challenges and opportunities for Bangladesh. Over the past three years, the Bangladeshi Taka has devalued by more than 40%, transitioning from Tk85.80 to Tk122 against the dollar. This shift, significantly influenced by Federal Reserve rate hikes post-Russia-Ukraine conflict, has now created conditions where the weak dollar is expected to lower import costs, helping to alleviate domestic price pressures.
A declining dollar may present advantages for Bangladesh’s apparel sector as US tariff increases on imports, particularly from China, drive buyers to seek alternative sources. This shift could result in a more favorable environment for Bangladeshi exports, which surged by 45.93% year-on-year in January 2025. As demand for textiles grows, Bangladesh may strengthen its foothold in the US market.
Furthermore, lower borrowing costs due to expected reductions in the Federal Reserve’s policy rates will ease financial pressure on local banks and businesses sourcing foreign funds. This scenario offers Bangladesh Bank an opportunity to stabilize the Taka against further depreciation. Market insiders view the weakening dollar as a chance to secure low-cost foreign funding, facilitating business transactions.
However, challenges remain. As US tariffs rise, inflating prices domestically, American consumers may curtail spending, which could negatively impact export orders for Bangladeshi businesses. Although US intentions to boost local manufacturing through tariffs may benefit sectors like automotive and technology, the garment industry remains labor-intensive and less viable in the US due to high labor costs.
While Bangladesh stands to gain from shifting supply chains in the apparel industry, it remains crucial to balance the potential benefits against the risks of rising inflation and declining export competitiveness. A recent increase in apparel orders hints at growing diversification in sourcing strategies, suggesting an avenue for sustained growth amid changing global trade dynamics.
In summary, while the depreciation of the US dollar poses certain risks for Bangladesh, particularly in terms of export competitiveness, it also creates significant opportunities for reducing import costs and boosting apparel exports in the face of increasing US tariffs. The potential for increased diversification and growth in the textile sector may offset some challenges, offering a strategic path forward for Bangladesh amidst fluctuating global economic conditions.
Original Source: www.tbsnews.net
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