Bangladesh economy starts recovering, but hurdles remain: MCCI

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Bangladesh's overall economy has started dealing with the Covid-19 shocks, even though some major challenges are there in a few areas for maintaining its growth momentum, the Metropolitan Chamber of Commerce and Sector, Dhaka (MCCI) provides said.

The challenges are - slow implementation of the government's development projects, unemployment situation, lower investment trend and sluggish growth of tax-revenue income, the trade-body opined in its Overview of ECONOMY in Bangladesh going back October-December period (Q2 of FY 21) on Thursday.

"Bangladesh's economy is currently rebounding from the Covid-19 shocks as a result of time-befitting techniques of the federal government alongside implementation of the stimulus deals."

"Turning to FY 21, economic circumstances seem to have been gradually improving following the easing of restrictions found in late May 2020, supported by the federal government policies."

The MCCI said the main macro-economic indicators like inward remittance, forex reserve, money source and inflation remained satisfactory during the quarter under review (Q2 of FY 21).

The exchange rate has long been stable, as the current account and balance of payments account are also in positive trajectory.

Although a sizable segment of informal industries, services and other activities have resumed their operations, these seem to be to be working at a lower degree of their capacities, the chamber mentioned.

"The export-oriented garment and leather, and the domestic market-oriented steel, food-processing and transportation sectors are not running completely scale however," the MCCI said, suggesting these positive changes need to be interpreted carefully.

It, even so, opined that private investors want to cope with the situation rather than making further investments.

The MCCI also suggested that there is a dependence on significant rise in the general public and private investment in the country to help maintain competitiveness and foster further growth.

"Employment cannot grow fast a sufficient amount of when private investment is stagnating. Private investment in the united states has been hovering around 22-23 % of the GDP for several years."

The review further said domestic reforms as well as initiatives are urgently needed to liberalise trade policy regime for bettering the investment climate and rejuvenating employment growth.

In its sector-wise analyze, the MCCI said because of slower financial activities, caused primarily by Covid-19 in the last months, the country's industrial sector recorded a lower growth (6.48 %) in FY 20, in comparison to 12.67 per cent in FY 19.

In the broad industry sector, the making sub-sector recorded a lesser growth of 5.84 per cent in FY 20 due mainly to Covid-19, when compared to previous fiscal year's 14.20 %.

To overcome the possible impact of the pandemic over the sector, the federal government announced a bail-away package of Tk 300 billion for the damaged industries and support sector organisations to provide performing capital through banks in low interest rate found in April 2020, it mentioned.

Tax revenue collection under the National Board of Income (NBR) lagged behind by Tk 307.91 billion or 21.80 % against the prospective of Tk 1,412.25 billion set for H1 of FY 21.

The NBR collected Tk 1,104.34 billion in July-December of FY 21 in comparison to 1,062.42 billion in the corresponding amount of the prior fiscal year, the MCCI noted.

Alternatively, the ADP implementation rate in the first half of the current fiscal year was less than that in the corresponding half of the previous fiscal year.

Referring to official data, it said 58 ministries and divisions could spend Tk 512.66 billion or 23.89 per cent of the total allocation of Tk 2,146.11 billion in July-December of FY 21 in the aftermath of Covid-19.

In the corresponding period of the go on fiscal, Tk 571.96 billion was spent, that was 26.59 % of the total outlay (Tk 2,151.14 billion), added the MCCI.

However, the country's inward remittance in the quarter under review (Q2 of FY 21) grew by 27.47 per cent to US$6.23 billion from $4.89 billion in Q2 of FY 20 regardless of the ongoing pandemic.

The government incentive and the latest policy support supplied by the Bangladesh Bank (BB) helped raise the remittance growth.

The MCCI said the country's overseas employment sector has been facing a blow as a result of Covid-19 outbreak.

"Although there is an apprehension that about 1.0 million migrant employees might go back home amid the pandemic, about 0.326 million have returned up to now, based on the Ministry of Expatriates Welfare and Overseas Job," it mentioned.