Pandemic-induced economic slump Full recovery largely hinges on policy responses, virus containment measures28 October 2020
The outbreak of novel coronavirus has given an unprecedented shock to the Bangladesh economy as did in most of the countries.
The shock was felt by decline in domestic demand, fall in production, exports and revenue earnings, job cut and supply line disruption amid halt in economic activities caused by pandemic lockdown measures at home and abroad.
The government of Bangladesh first imposed a countrywide lockdown on March 26 and extended it six times in an effort to contain the pandemic.
The economy almost came to a standstill after imposition of the lockdown and its debilitating effects were observed in almost all sectors.
Around 3.6 crore people lost their jobs in the 66-day countrywide lockdown declared by the government to contain the coronavirus pandemic, according to Bangladesh Economic Association (BEA).
The government, finally, decided to reopen the business activities (conditionally) in the country from 31 May 2020 as pandemic containment measures continued to take heavy toll on the citizens’ livelihood and the economy.
The pandemic driven slowdown in economic activities still persists although businesses reopened after months of lockdown. Even, the economy is yet to absorb the jobs wiped out during the countrywide.
Analysts said that the spread of coronavirus across the Bangladesh since March left devastated impact on domestic economy and it is now on the track to recovery after reopening from lockdown. Also, advancement is in sight of several macro-economic fronts, including remittance, export, foreign exchange reserve (which crossed $40 billion dollar mark by this time), and food grain production.
In particular, the country received $6.71 billion in remittance in the first three months of the current fiscal year, up by 48.57 per dent compared with the same period of last year. Besides, exports in July-September increased by 50 per cent compared with the corresponding period of the last year. In March this year the export earnings were just U$520 million, down from U$3.03 billion in the same month of last year, according to the Export Promotion Bureau of Bangladesh (EPB).
Remittances, which have a big role to keep Bangladesh economy afloat, has hit by the pandemic. In March, they dropped by 12 per cent and in April by 25 per cent. Estimates suggest that over 1.4 million migrant workers have either returned or are on their way back home due to job losses.
The World Bank estimates that, overall, inward remittances might fall by around 22 per cent in 2020 due to the pandemic.
The Covid-19 induced global economic slowdown hit Bangladesh’s export in a big way. In March this year the export earnings were just U$520 million, down from U$3.03 billion in the same month of last year, according to the Export Promotion Bureau (EPB).
Apparel industry--the mainstay of Bangladesh economy-- had lost US$ 5 billion export orders (claimed by exporters) as global buyers put a hold or cancelled orders during March-May due to lockdown measures in Europe and America.
After the pandemic hit Europe and the US, the industry experienced a reduction in exports as much as 84 per cent in April 2020 compared with that of the previous year. More than 1,000 factories have been closed and 2.19 million workers lost their jobs, according to the NGO study.
Apparel industry owners said that they are now receiving orders from buyers, as lockdowns in most western cities have been relaxed. But now they have to execute orders lower than the price offered in normal times, which makes the industry production highly unsustainable.
The industry has been reopened but it is now running with 50 and 60 per cent production capacity, according to industry insiders.
Despite the progresses, uncertainty and volatility related to the pandemic, and its negative effect on consumer and business activity is evident in the country, said analysts.
As the pandemic uncertainty persists, analysts also knocked down the hopes of quick rebound, saying that though the economic activity increased, gains were generally modest and activity remained well below level prior to the Covid-19 pandemic.
The fact is that until Covid-19 uncertainty melts away; there is little chance of full economic recovery. However, a full recovery may take years, and it will hinge largely on the government’s policy responses and the country’s ability to contain the virus that has infected about 393,131 Bangladeshis (as of November 21) and continues to spread.
The government has already announced stimulus package to aid the businesses hit by nationwide shutdown. But a slow disbursement of funds under stimulus scheme further worsens owes of the businesses.
The government rolled out 20 stimulus packages totalling Tk 111,141 crore (3.7 per cent of GDP) after it reported the first coronavirus infections on March 8.
But only 26 per cent (around Tk 29,200 crore) of the massive fund was disbursed in four months till July, according to the latest progress report of the stimulus packages, supervised by the Prime Minister’s Office.
Media reports said the disbursement of the funds was quick for sectors like export-oriented and large industries. But the cash-strapped small and medium enterprises and farm sectors are yet to avail much of the support, making it difficult for them to recoup the losses incurred by pandemic-induced disruption as well as restart their operation in full swing.
The government should take bold steps in this regard and focuses more on supporting small, medium and cottage industries to protect jobs and keep up livelihood of millions of people employed in this vital economic sector.
The country’s small, medium and cottage industries employ about 80 per cent of the informal work force. It was reported that the pandemic has rendered 80 per cent workers unemployed in the informal sector.
More than 50 million people are employed in the informal sector.
Economic analyst Dr AB Mirza Azizul Islam said the global health crisis caused by Covid-19 has wreaked havoc on the Bangladesh economy.
The rural economy is in particular hardest hit due to coronavirus induced economic slowdown. Now pressure has been added to it as thousands of jobless people trudge back village homes from the capital and various cities. The returnees can hardy manage a job in village because crisis was already there. So, they are now facing risk falling deeper into poverty.
“The pandemic will also exaggerate inequality and fuel tension in the society unless the government ramps up action to protect people, especially the poorest and most vulnerable,” said Mirza Aziz.
He also said that the country would face enormous challenge to reshape its economy. We have to wait for years to return to the pre-crisis level of economic activity.
Economist Dr Ahsan Mansor said the economy is facing one of the largest downturns since the independence due to the Covid-19 pandemic.
“The government policymakers should devise short, medium and long-term strategies to revive the economy as well as absorb the pandemic shocks. Placing the economy back on track is also necessary to avert fiscal indiscipline, permanent joblessness and social unrest.”
He said the revival of domestic economy will also depend on the pandemic situation in Europe and America and recovery of their economies.
Economic slowdown in Europe and America is of particular concern for Bangladesh as these are the principal markets for Bangladesh’s principal export product—readymade garments (RMG). Most European nations and the USA are badly affected by the pandemic and a second wave of infection will impact their economies and population very badly.
So, Bangladesh’s exports to these destinations may not go back to pre-pandemic level soon and thus will harm export-oriented industries and impact on GDP growth.
In the last decade, the economy has been growing at around 7 per cent per annum, but the ramifications of coronavirus has pushed down the GDP growth to 5.24 per cent in the last fiscal year (2019-20) from an all-time high 8.15 per cent recorded in the previous fiscal year.
Kazi Zahidul Hasan is the joint news editor of The New Nation