Fiscal and policy space for crisis response with a focus on employment and labour market: Study of Bangladesh

One of the major aspects of the global economic crisis of 2008-09 was deep economic recession that many developed countries suffered from. A number of developing countries also suffered economic downturns, if not outright recession. The importance of counter-cyclical macroeconomic policies in fighting the economic downturn has been widely recognized. However, the ability of countries to adopt such policies depends on the fiscal capacity to meet the necessary costs (if necessary, by allowing a fiscal deficit) and the institutional capacity to implement such policies, especially if they were to contribute to protecting the poor and the vulnerable. While most developed countries adopted such policies to stimulate their economies out of the downturn, the response of the developing countries varied, depending on the fiscal and policy space they had for accommodating the necessary increases in expenditures and for implementing the relevant programmes. It may be recalled in this context that the economic crisis came soon after the global economy witnessed crises caused by very high prices of fuel and food as a result of which many developing countries dependent on imports of those commodities were already suffering.