Author: Lana

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Analysis

Economic Crisis in Bangladesh and Talks with the IMF

Introduction

Bangladesh’s economy was already under much stress due to the COVID-19 pandemic, however, the global political and economic situation has not made it any easier for this South Asian country’s economy to bounce back up. Bangladesh is already the third country after Pakistan and Sri Lanka to apply for a bailout from the International Monetary Fund (IMF) to avoid “running out of cash” (The Guardian).

Why was the decision made?

It comes as no surprise that the pandemic has slowed down the global economy and that in 2022, countries are still desperately trying to resolve the issues that came with this pause such as inflation, the supply chain crisis, etc. On top of that, the ongoing conflict between Russia and Ukraine has had consequences that are felt everywhere with prices of energy and food growing at a fast pace.

The global economy by itself has been predicted to go into recession, and thus Bangladesh is struggling due to the substantial fall in exports and rising prices of imports that grow by the day. Despite many countries seeking help from the IMF during the pandemic, only several (including Bangladesh) have sought bailouts to avoid going into debt or “being unable to pay the bills” (The Guardian). Talks about Bangladesh’s bailout are expected to begin after the IMF and World Bank annual meetings in October, which is also when the size of the loan will be decided. 

On the 22nd of August, Bangladesh Cabinet Secretary announced that schools will now be closed on Saturdays in addition to Fridays and office hours will be lessened, in order to reduce the electricity shortage experienced in the country. In the past month, petrol prices increased by 50% while the prices of diesel and kerosene rose by at least 40% as well. Thus, it comes as no surprise that frustrated citizens have taken to the streets to protest the insupportable fuel prices.

International Impacts

Up until COVID-19 slowed its quick development, Bangladesh’s economy was “one of the fastest-growing in the world for years.” The economic growth was largely due to Bangladesh’s garment industry, which exports to retailers in Europe, the US, and South America. This industry is likely to suffer from the slowdown in the global economy as well, especially if demand falls in Europe and the United States. However as the global economy recovers, it will only be beneficial for Bangladesh’s financial state to be on the mend, ready to supply other countries with their main exports. 

As for the IMF, Bangladesh has expressed its interest in its resilience and sustainability facility, which is designed to help countries resolve climate change challenges. Aside from that, however, the IMF is open to supporting Bangladesh in its economic crisis and has said that “staff will engage with the authorities on program design”.

Conclusion

The IMF is eager to support Bangladesh and will start negotiating the amount of the loan sometime after the October meeting between the IMF and the World Bank. Despite this, prices are continuing to rise not only in Bangladesh but internationally, as the conflict between Russia and Ukraine doesn’t seem to be near its end. This has already caused various protests in many countries due to inflated costs of energy and food, which in low-income countries, affect citizens even more. However, with countries trying to become less reliant on Russia for their energy supply, it is interesting how they will come back from this crisis in the years to come.

Sources

Inman, Phillip. “Bangladesh to Hold Talks with IMF after Applying for Bailout.” The Guardian, 28 July 2022, http://www.theguardian.com/world/2022/jul/28/bangladesh-to-hold-talks-with-imf-after-applying-for-bailout.

Lawder, David. “IMF Says It Is Working with Bangladesh on RST Loan with “Safeguards.”” Reuters, 3 Aug. 2022, http://www.reuters.com/markets/us/imf-says-it-is-working-with-bangladesh-rst-loan-with-safeguards-2022-08-03/. Accessed 29 Aug. 2022.

“Now It’s Bangladesh’s Turn to Ask the IMF for a Loan.” http://www.aljazeera.com, 27 July 2022, http://www.aljazeera.com/economy/2022/7/27/now-its-bangladeshs-turn-to-ask-the-imf-for-a-loan. Accessed 29 Aug. 2022.

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News

Finland and Sweden: Applications to join NATO

Introduction

The ongoing war in Ukraine has caused numerous security concerns to arise in many European countries. As the Russian Federation continues its military actions, two countries that have historically held back from joining NATO, Finland and Sweden, have applied to join the intergovernmental organization. This led to a rise in tension in their relationship with Russia, but many Western countries have expressed their support.

Why was the decision made?

The two countries’ decision stemmed from Russia’s ongoing invasion of Ukraine, which started earlier this year on February 24th. The West has criticized Vladimir Putin for endangering European security since, and the Nordic countries debated heavily on whether or not to join NATO. Although both countries have been NATO partners for many years now, they did not have the one thing that could protect them from a potential attack: article five. Article five is part of the collective defense, which is at the heart of the organization. It states that an attack on one of NATO’s members means an attack on every member, hence guaranteeing help from other members of the alliance in the case of military trouble. 

Therefore, Finland and Sweden’s decision to join NATO is significant as both countries have a long history of staying away from military alliances and maintaining a mostly neutral approach to many political situations. As NATO partners, Finland and Sweden do not currently have the protection of article five, and aren’t fully involved in the military decisions that are made. The situation in Ukraine, however, forced them to change their long-standing policies of neutrality and apply to become full members of NATO, an indicator of just how serious the security issue is for all European countries.

International impacts

In order to join NATO, the decision must be unanimous — supported by all 30 member states. Although most members have supported Finland and Sweden, Turkey has been hesitant in accepting them into the alliance. According to Turkish president Recep Tayyip Erdogan, Sweden and Finland’s governments back groups considered ‘terrorists’ by the Turkish government. Despite this setback, the member states have agreed to speed-up this process, considering the threat that Russia poses to both Finland and Sweden (the process normally takes up to 12 months). The Russian government has also commented on this situation and even though it does not consider the countries’ applications to join NATO a threat, Russian Deputy Foreign Minister Sergey Ryabkov said the two countries “should have no illusions that we will simply put up with it.”

Conclusion

Despite Turkey being opposed to Finland and Sweden joining NATO, it seems that the alliance will eventually welcome the two new members and hence increase security for the Nordic countries as well. This will be a huge change because Finland, which shares a border with Russia, will now also have the advantage of collective defense. The “vacuum for security” in that region will now be filled. Moreover, according to Theresa Fallon, founder of The Center for Russia Europe Asia Studies (CREAS), should the decision go through “this is going to be very hard for Putin to explain to the public, that instead of pushing back at NATO, it’s actually got two new members.”

Sources

Al Jazeera. ““Historic Moment”: Finland and Sweden Formally Apply to Join NATO.” Www.aljazeera.com, 18 May 2022, http://www.aljazeera.com/news/2022/5/18/finland-and-sweden-submit-applications-to-join-nato. Accessed 22 May 2022.

—. ““Military Tension Will Rise”: Russia Chides NATO Nordic Expansion.” Www.aljazeera.com, 16 May 2022, http://www.aljazeera.com/news/2022/5/16/russia-wont-put-up-with-natos-nordic-expansion-minister. Accessed 22 May 2022.Henley, Jon. ““A Historic Change”: How Sweden and Finland Trod Separate Paths to Nato.” The Guardian, 20 May 2022, http://www.theguardian.com/world/2022/may/20/sweden-finland-separate-paths-to-nato.

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Analysis News

Sanctions imposed on Russia: a big change to daily life

Introduction

This year, on the 24th of February, the world witnessed the Russian invasion of Ukraine. After rising tensions, the Russian Government decided to start the ‘special military operation’ which has since claimed thousands of lives. As a result of this conflict, many countries were quick to impose strict economic sanctions on Russia, which have already had their effect on the Russian economy. But what are the consequences of such sanctions on daily life in Russia?

What sanctions have been imposed?

Many countries, among them the US, UK, New Zealand, and the EU member countries, immediately imposed different sanctions to try and stop Russia from further military actions. The more or less immediate reaction of the US government was to ban the export of certain technologies to Russia, which would “make it harder… to modernize [Russia’s] oil refineries.” (Al Jazeera) However, one of the most significant actions the US took was banning Russian oil, which is one of Russia’s biggest exports. Among many others, the EU froze the European assets of Russian President Vladimir Putin and his foreign minister Sergey Lavrov. Russia’s ally country, Belarus, also suffered some consequences as the EU banned imports of products from tobacco, mineral fuels, cement, steel, iron, etc. Many different companies such as IKEA, Spotify, and Apple have also decided to leave Russia. Among them are also Visa and Mastercard who have suspended operations in Russia. This has already had its effects on the Russian economy because people are unable to complete transactions.

Impacts on daily life in Russia

When the war started and the sanctions were imposed, the Russian rouble “plummeted…, leading many retailers to raise their prices.” People living in Moscow believe that while food may not disappear, prices will probably rise exponentially. “On 20 February I ordered groceries for 5,500 roubles [about $57; £44] and now the same basket costs 8,000,” says an EU citizen living in Moscow. While certain retailers are simply limiting the amount of products people can buy, others have “agreed to limit price rises on some staples to 5%”. Moreover, there has been a more than 10% increase in the prices of smartphones and televisions, but many of them quickly sold out before the companies left the Russian market.

International impacts

Perhaps one of the most significant sanctions was one imposed by the US when it banned imports of oil and gas from Russia. The UK has also followed in the US’s steps and has started to “phase out oil imports”. The European Union said it would “move to end its reliance on Russian gas”. 

Why is this important? Along with Iran and Qatar, Russia is home to the largest reserves of natural gas. Half of the world’s natural gas reserves in 2020 were accounted for by the three aforementioned countries. In 2021, 45% of the EU’s gas imports and 40% of its entire gas consumption came from Russia. Despite the EU and other countries announcing plans for ending their reliance on Russian oil and gas, it seems as though these sanctions will have certain long-lasting consequences. As soon as the US stopped such imports from Russia, oil and gas prices started to rise and the same is expected in other countries that have imposed similar bans.

Conclusion

Sanctions imposed on Russia have so far affected its citizens much more than the people with the power to stop the war in Ukraine. However, their long-lasting effects on the conflict remain to be seen. It is true though, that bans on Russian oil and gas from some of the major countries in the world will have great consequences for the world’s economy as people are realizing their economic dependence on Russia and governments who support Ukraine will try to distance themselves from such policies and trade in the future. Daily life in Russia, although already hard, is expected to get harder, as products disappear and soon enough, jobs might also vanish. In this case, Russia will have a very hard time getting its economy back on track and the lives of its citizens back to normal.

Sources

Al Jazeera Staff. “Infographic: How Much of Your Country’s Gas Comes from Russia?” Www.aljazeera.com, 17 Mar. 2022, http://www.aljazeera.com/news/2022/3/17/infographic-how-much-of-your-countrys-gas-comes-from-russia-interactive. Accessed 19 Mar. 2022.

—. “List of Sanctions against Russia after Ukraine’s Invasion.” Www.aljazeera.com, 3 Mar. 2022, http://www.aljazeera.com/news/2022/2/25/list-of-sanctions-on-russia-after-invasion.

—. “US Bans Russian Oil: What Is next for Oil and Gas Prices?” Aljazeera.com, Al Jazeera, 9 Mar. 2022, http://www.aljazeera.com/news/2022/3/9/us-bans-russian-oil-what-does-this-mean-for-oil-prices.

Badshah, Nadeem. “Visa and Mastercard Will Both Suspend Operations in Russia.” The Guardian, 5 Mar. 2022, http://www.theguardian.com/world/2022/mar/05/visa-and-mastercard-will-both-suspend-operations-in-russia. Accessed 19 Mar. 2022.

Hanbury, Mary, et al. “Here Are the Major US and European Companies Pulling out of Russia Following the Invasion of Ukraine.” Business Insider, 10 Mar. 2022, http://www.businessinsider.com/list-all-the-companies-pulling-out-of-russia-ukraine-war-2022-3#28-tiktok-28. Accessed 19 Mar. 2022.

Shamina, Olga, and Jessy Kaner. “Russia Sanctions: How the Measures Have Changed Daily Life.” BBC News, 13 Mar. 2022, http://www.bbc.com/news/world-europe-60647543.

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Analysis

Bottleneck Recession in Germany: when will the situation improve?

Introduction

It is no surprise that the COVID-19 pandemic has damaged many of the world’s biggest economies. Last year in Germany, however, economists started predicting something called a “bottleneck recession”. Many of the materials that German firms need for production of goods are in short supply, hence harming the supply chain of the economy. But when will the German economy bounce back? And what will be the consequences of such a recession?

What are supply bottlenecks?

One of the most important issues to consider here are supply bottlenecks. A simple analogy for a ‘bottleneck’ would be a machine that is not working efficiently, and hence a long waiting period appears until the final result is delivered. 

In general, this occurs when price increases (inflation) result in an increase in the price of wages as well as raw materials. This causes a decrease in aggregate supply (amount of total production) of an economy. And because the demand for goods does not change (meaning people still want the same amount of goods as before), firms have to increase prices of the goods. The effect is that the increased cost of production is passed onto the consumers by firms.

Recent developments

Global supply chain bottlenecks have been one of the biggest problems in 2021 for many countries. One of the most affected economies was Germany because exports of cars, machine tools and other goods make up approximately half of its economic output. In the US, economic output depends on only 12% of  these types of exports. This sort of dependence on manufacturing and trade makes countries like Germany more susceptible to issues in the supply chain. 

Put simply, if factories do not have the necessary raw materials for production of goods, their economic output and amount of exports will decrease and hence harm the economy. 

It should be mentioned that economic output may have increased in November of 2021, but it also decreased by that same amount in December 2021, hence canceling out any growth seen in the German economy. And with the current Omicron outbreak, it is unlikely the situation will improve anytime soon. Production cuts, staff shortages and restrictions are all results of rising infection rates. Combine this with increasing costs of energy and the country’s going into the aforementioned bottleneck recession. 
However, the future isn’t all uncertain for Germany’s economy. Many think spring will “mark a resumption in the pandemic rebound”. It is expected that “energy prices [will be] digested and supply-chain problems [may be] eased by then” which would lead to growth in the second and third quarters of 2022.

Impacts

Germany already faced consequences of the supply chain bottleneck in 2021 with its car sales rapidly shrinking and “Volkswagen AG deliveries [dropping] to the lowest in a decade, despite robust orders” 

4.1% was the earlier estimate of growth in Germany in 2022, which has now been lessened to 3.6%, mainly because tensions between Russia and Ukraine may result in augmented energy prices, even more so than beforehand. 

All of this was and will be the result of the bottleneck recession in Germany. However, such bottleneck issues in many economies can lead to “corrective behavioral changes over time”. Instead of focusing on efficiency, many countries that did go through supply chain bottlenecks this past year, will hopefully focus on making their economies more resilient as well, to avoid such setbacks in the future.

Conclusion

Today, Germany’s economy is still struggling because of supply shortages, with economic growth declining and the inflation rate increasing in 2021. But there is much hope for the next few years. Germany’s economy is expected to pick back up in the spring of 2022 as infection rates will hopefully decrease and make way for the gains that will likely take place in 2023.

Sources

Deutsche Welle. “Germany’s Bundesbank Lowers 2022 Economic Growth Forecast | DW | 17.12.2021.” DW.COM, 17 Dec. 2021, http://www.dw.com/en/germanys-bundesbank-lowers-2022-economic-growth-forecast/a-60156000.

Ewing, Jack. “Fears of a ‘Bottleneck Recession’: How Shortages Are Hurting Germany.” The New York Times, 5 Oct. 2021, http://www.nytimes.com/2021/10/05/world/fears-of-a-bottleneck-recession-how-shortages-are-hurting-germany.html.

Kenton, Will. “Cost-Push Inflation.” Investopedia, 30 Sept. 2020, http://www.investopedia.com/terms/c/costpushinflation.asp#:~:text=Cost%2Dpush%20inflation%20occurs%20when. Accessed 9 Feb. 2022.

Randow, Jana. “Bloomberg – Are You a Robot?” Www.bloomberg.com, 14 Jan. 2022, http://www.bloomberg.com/news/articles/2022-01-14/german-economy-heads-for-recession-after-shrinking-last-quarter. Accessed 9 Feb. 2022.

Rees, Daniel, and Phurichai Rungcharoenkitkul. BIS Bulletin No 48 Bottlenecks: Causes and Macroeconomic Implications. 2021.

Weber, Alexander. “Omicron, Supply Shortages Risk Pushing Germany into Recession.” Www.aljazeera.com, 28 Jan. 2022, http://www.aljazeera.com/economy/2022/1/28/omicron-supply-shortages-risk-pushing-germany-into-recession. Accessed 9 Feb. 2022.

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News

Human Rights Group Shut Down By the Russian Supreme Court

Introduction

Memorial Human Rights Center — the oldest human rights center in Russia — is to be liquidated by the orders of the Russian Supreme Court. The decision was made after the Court revoked the legal status of its sister organization, Memorial, which started off as an initiative group that served the preservation of the memory of Soviet repression. In 2015, the group was marked as a foreign agent in the government register, and the most recent court ruling concluded the lawsuit in which prosecutors warranted the group violated its regulations.

Why is this significant?

On the 28th of December 2021, the court stated that Memorial “creates a false image of the USSR as a terrorist state, [which] whitewashes and rehabilitates Nazi criminals”. The closure of this internationally acclaimed organization marks a point in Russia’s history, as recently, more and more NGOs and media outlets have been closed as a result of the “foreign agent” legislation, apart from the Memorial Human Rights Center. The efforts of independent media to spark a conversation about the crimes under Soviet leaders have been effectively shut down many times showing the sensitivity of the current government to criticisms of the country’s past. 

The decision to close the organization was called “political” by Genri Reznik, a lawyer who represented Memorial in court, among many others. He defended the organization by stating the following: “The Memorial Society promotes the health of the nation. To eliminate this from the history of the country now means to contribute to the idea of ‘the state is always right’.”

Public Outcry

Because of Memorial’s popularity among the Russian public, the group was hoping that large public support might negate the court’s decision. Memorial gathered more than 127,000 signatures in its support, followed up by testimonies from people who uncovered the stories of their relatives as a result of Memorial’s work of obtaining the necessary records. 

People such as the former Soviet president Mikhail Gorbachev and the Novaya Gazeta editor, Dmitry Muratov have also spoken about this issue. “The long-term activity of Memorial has always been aimed at restoring historical justice, preserving the memory of hundreds of thousands of victims during the years of repression, preventing such things now and in the future,” they said in a joint statement.

Police arrested several protesters, out of around 100, who stood outside the court and chanted “shame” when the decision to shut down the group was made.

Conclusion

As such events increase day by day, public outcry becomes more and more significant on a global scale. Memorial, in particular, stated they would appeal the ruling before the European Court of Human Rights. It seems as though the closure of groups such as this one, results in a bigger acknowledgment of Russia’s past than it would have without the court’s extreme verdict. Capturing the attention of international media, the case was commented on by many, including Dr. Piotr M. A. Cywinski, the director of the Auschwitz Museum, saying “A power that is afraid of memory, will never be able to achieve democratic maturity”.

Sources

  1. Al Jazeera. “Russian Court Orders Closure of Leading Rights Group Memorial.” Www.aljazeera.com, 29 Dec. 2021, http://www.aljazeera.com/news/2021/12/28/russia-supreme-court-orders-closure-of-leading-rights-group. Accessed 3 Jan. 2022.
  2. International Memorial. “Memorial – Memorial History. A Timeline.” Memo.ru, http://www.memo.ru/en-us/memorial/memorial-history-timeline/. Accessed 3 Jan. 2022.
  3. Rainsford, Sarah. “Russian Court Orders Oldest Civil Rights Group Memorial to Shut.” BBC News, 28 Dec. 2021, http://www.bbc.co.uk/news/world-europe-59808624. Accessed 5 Jan. 2022.
  4. Roth, Andrew. “Russian Court Orders Closure of Another Human Rights Group.” The Guardian, 29 Dec. 2021, http://www.theguardian.com/world/2021/dec/29/russian-court-orders-closure-of-another-human-rights-group. Accessed 5 Jan. 2022.
  5. —. “Russian Court Orders Closure of Country’s Oldest Human Rights Group.” The Guardian, 28 Dec. 2021, http://www.theguardian.com/world/2021/dec/28/russian-court-memorial-human-rights-group-closure. Accessed 3 Jan. 2022.