Covid-19: Economic challenges facing Bangladesh

14 Jun 2020 10:42 AM
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It right now appears that Bangladesh is facing a significant economic crisis in the building caused by the Covid-19 pandemic. After a short reopening of the market, the country now possesses reverted to  'hard' lockdowns in a variety of places to cope with the Covid-19 pandemic amid requirements from certain parts of the population to take action.

But lockdowns are not sustainable for the time that will come to be  required to create a vaccine. Likewise, lockdowns are not simple for a region like Bangladesh if people can not be given the essential necessities of life. Moreover, it could bring the overall economy to an almost grinding halt that may result in a significant blow to the overall economy having crippling results on the lives of individuals, especially working people and business enterprises in the united states. Actually, the economy is now almost coming to a grinding halt with debilitating results  on all sectors of the overall economy thus threatening an incredible number of livelihood in Bangladesh.

While the government is striving to support the virus, emphasis should be directed extra to augment immunity. Offered the reference availability and a poor and inadequate healthcare program to manage the pandemic, Bangladesh may default into building up some kind of  'herd immunity',  consequently more people turn into immune to the virus, thus reducing transmitting. This is often done by  managing instead of defeating the virus allowing the united states to begin to start.

Actually, epidemics of how big is Covid-19 have huge financial impacts regarding managing medical crisis and containing the virus while trying to keep the economy functioning.  In line with the Bangladesh Bureau of Figures (BBS), 20.5 % of the populace live below the poverty range  that is about 34 million persons and 85.1 per cent of work force are used in the informal sector, that is about a lot more than 50 million people. Most of these personnel in the informal sector happen to be also underemployed. Nowadays the pandemic has further worsened their employment potential customers. It is right now approximated that the pandemic has rendered 80 per cent staff unemployed in the informal sector. Simply 6 million people are employed in the formal sector, largely in manufacturing.

Over the last decade, the overall economy has been growing at around 7 per cent yearly, yet 20 % of the populace earn significantly less than US$5.00 a day, 9.2 % of employed found in the country earn significantly less than US$1.90 a day and only 15 per cent of Bangladeshi employees earn over US$6.00 a day. This can be a pre-pandemic occupation and wages circumstances in the united states. Now the situation has worsened significantly.

Nearly 10 million Bangladeshis will work in foreign countries, mostly in the Gulf countries. Now the depressed essential oil rates affecting the Gulf says and lockdowns imposed in Europe since April already are causing serious economical slowdown in these countries having a negative effect on expatriate Bangladeshi employees abroad.

ON, MAY, 9,  the World Health Organisation (WHO) declared that the pandemic situation globally was 'worsening'. Amid this worsening global pandemic circumstances, the World Bank (WB) in its kept up to date Global Economic Prospects Article  projected that the global market would contract 5.2 per cent this season (2020) and suggested a further downward revision was possible. Which will reason the deepest recession since a 13.8 per cent global economic contraction in 1945-46 at the end of the World War II.

Economic slowdown on Europe and North America is usually of particular concern for Bangladesh as they are the principal markets for Bangladesh's principal export product -- readymade garments (RMG). These two regions  are  also likely to continue steadily to slowdown at least for up coming half a year or more and which has  implications for 4 million staff in the RMG industry in Bangladesh.

As well, RMG generates close  to $30 billion in exports accounting for 83 per cent of total exports and 14 % of GDP. Nowadays the industry is normally in deep crisis as  exports plummet as a result of cancellation of purchase orders from Europe and THE UNITED STATES. In line with the Financial Express of May 9, merchandise exports dropped by 61.57 per cent equal to $1.46 billion in-may this year when compared to same month last year (2019). 

Remittances from Bangladeshi personnel accounted for $15.5 billion to the national economy in 2018. Now web host countries in Europe and the Middle-East  happen to be themselves facing financial slowdown causing large-level layoffs of migrant employee. Most of them are now returning home to Bangladesh and on go back heading towards their nation homes exacerbating medical crisis.

Bangladesh has a better reliance on trade in accordance with  the different countries in the region, making the united states  more subjected to changes found in the global economical environment due the current pandemic. The effect on the Bangladesh market due to fall in export revenue from RMG and various other exports and also  fall in remittances may very well be very significant. Significantly, forex earnings  of the country are expected to stop by about 25 per cent which in monetary conditions is estimated at  a lot more than $4 billion.

In early on March, the Asian Development Bank (ADB) estimated that the Bangladesh economy would contract by 1.1 % wiping  $3.02 billion  off its GDP. The Environment Lender (WB) and the International Monetary Fund (IMF) predicted a decline of only over 2 per cent during the current fiscal yr. Their prediction appears to be fairly natural given the rising numbers Covid-19 infections and fatalities the country is currently having and the reimposition of lockdowns. The Economical Intelligence Device (EIU) estimate is a lot more dire, predicting a decline of 4 per cent of Bangladesh GDP following year.

Bangladesh is currently categorised as a good least developed nation (LDC). However the last three decades have already been marked by the united states achieving significant economic growth and poverty reduction. In recent period the rate of development features been hovering around 7-8 % per annum which includes propelled Bangladesh to meet the requirements to become developing country by up coming year (2021). Today the economic downturn due to the Covid-19 pandemic will probably set that aspiration on carry.

Faced with the looming economic crisis, on March 25, Prime Minister Sheikh Hasina announced a bailout/stimulus package of Tk 50 billion ($600 million) to  assist  export oriented industries. The Primary Minister on April, 5, further  announced another stimulus bundle of TK 67.7 billion. Taken alongside one another these stimulus packages account for about 3 per cent of GDP. The IMF also provide financing of $732 million. But even well designed stimulus packages can be rendered ineffective, if Bangladesh can not overcome and go at night all pervasive systemic barriers in utilising the stimulus packages.

So far, there were no runs in basic essentials of existence in Bangladesh simply because happened in many different countries. Bangladesh also offers greater social resilience than richer countries. Persons in Bangladesh, generally, rely much less on the talk about and have a lot more experience in working with natural disasters. Likewise, strong interpersonal bonds provide help persons to weather through tough times. Bangladesh can be food self-sufficient largely helped by huge tariff barriers. The united states also has an extended established government supported food distribution program geared for the indegent. As such produces the country additional resilient to disruptions in global foodstuff supply chains.

But with that said, the economic downturn due to the pandemic could have serious implications for the economy and society. Although wellbeing crisis may last for some time, the monetary crisis that the pandemic  has caused will outlive it and previous for several years, could even last for a decade or more. A  statement posted by the International Labour Organisation (ILO) last month (May, 2020) concluded that  the economic aftereffect of the pandemic was providing a 'triple shock' to young persons by destroying their jobs, disrupting their education and training and creating obstacles to get or move between jobs.

Actually, the pandemic is creating a 'lockdown generation' of young people. That made Director General of the ILO, Guy Ryder  to comment 'if we do not have significant and quick action to enhance the condition, the legacy of the virus could be with us for years'. The prognosis is quite quite dire. There is currently a growing dread that Bangladesh may risk a massive reversal of economical gains made during the last three years, more alarmingly a whole generation may be lost, if certainly not in lives, but in opportunities and dignity.

Economic downturns (recessions) are fundamentally cyclical, not structural, the boundary between the two could be blurred. Frequently a cyclical downturn can rebound with a structural overhang triggering households' willingness and capability to spend or borrow staying structurally impaired as was the circumstance  with the US economy since it recovered from the GFC. This was equally true of businesses to get. 

Also, recessions are caused by demand deficiencies, but this time around it has been due to the pandemic leading to a supply shock  negatively impacting both household and business expenditures.  The current economic crisis continues to be in its early stage, but the dread is that it will be as serious as the 'Great Depression' of 1929-33, influencing the global market. Bangladesh is now confronted with battling both pandemic and its economic fallout. In such a situation economic risks aren't only limited to short-term, but also reaches major future efficiency losses both through labour and capital. The economic crisis is  likely to trigger a series of corporate and home debt defaults turning out to be a financial meltdown as well.

Bangladesh features  already initiated  fiscal responses to mitigate the emerging crisis however the stimulus packages usually do not glimpse robust enough to meet the existing needs. Bangladesh now includes a relatively low personal debt/GDP ratio but that may reverse as productivity falls sharply and deficit grows. That could make the government hesitant  to attempt any robust  stimulus initiatives.  However, the national finances of 2020-21 has allocated TK386.88 billion stimulus bundle (FE, June, 12). While organization leaders welcomed the spending plan, however they remain unconvinced about its execution of the bundle (FE, May 12). Even so, surprisingly there is no explanation/s advanced for his or her scepticism. 

Bangladesh is now facing a crucial period in its  economic history and there is not much space for working out fiscal prudence at this critical time. Fiscal policy must play a far more decisive and significant  position  because of the fact that the scope for employing monetary insurance policy to stimulate the economy is becoming ineffective despite falling actual interest levels. As the economic healing process can move out be considered a  long drawn-out procedure, the government must continue with the fiscal stimulus until recovery is assured.