Bangladesh’s economy is likely to continue to shine in the new year as the silver lining of an economic recovery is apparent now from a year-long topsy-turvy ride due to global Covid-19 pandemic in the outgoing 2020.
The world entered a fresh spell of economic recession triggered by an unprecedented global pandemic from the very outset of 2020, but Bangladesh somehow managed to bring its derailed economy back on track supported by timely steps and policies.Like the rest of the world, Bangladesh also put in place two months’ lockdown from late March to May to avoid the spread of coronavirus, putting most economic activities nearly to a halt at that time.
Defying the World Bank’s 1.6 per cent and IMF’s 2 per cent growth projections, the country finally managed to post a healthy 5.4 per cent GDP growth in FY20 when most of the economies saw negative growth.
Sufficient food production coupled with a strong supply chain put a cushion during the lockdown period as it helped the country avoid a potential food crisis.
Quick response by the government with 21 bailout packages worth Tk 1.21 trillion or GDP 4.3 per cent helped the economy reshape, even though not at the pre-Covid-19 level, according to analysts.
“The year of 2020 will be definitely marked as the Covid-19 year. Despite some debates about growth figures, there is no debate about the country’s positive growth,” Distinguished Fellow of independent think tank Centre for Policy Dialogue (CPD).
“The country has done impressively well in avoiding a food crisis during the pandemic. Food production and supply chain were very good that helped avoid the price volatility of essential commodities,” the noted economist added.He, however, felt the lack of a “strong shock absorption capacity” in the economy, especially in the health sector, to encounter any abrupt shock like the corona pandemic.
In terms of mitigating risk of food security, the country has done extremely well, but its economic, humanitarian and health risks were exposed during the pandemic, he pointed out.
Bangladesh’s stable economic growth over the past two decades and its gradual integration into the global economy has made it a model for economic development with it GDP growth reaching at its peak of 8.15 per cent in FY-19.
Riding on this success, there was a high hope of achieving an 8.2 per cent growth in FY20, which was shattered by the onslaught of coronavirus pandemic.
In recent years, Bangladesh has seen impressive success in reducing poverty, but the pandemic has pushed up the poverty rate to 29.5 per cent from only 20.5 per cent in FY19 in line with the official estimate.
According to the Bangladesh Institute of Development Studies, the pandemic has led to 13 per cent of people losing work and a decrease in household income, pushing 16.4 million new people below the poverty line.
This has serious implications for the country’s socio-economic and developmental performance in the near and medium-term, according to economic analysts.
Global apparel buyers either suspended or cancelled orders from Bangladesh during April-May 2020, which was equivalent to $3.18 billion. RMG exports declined to $374 million in April 2020, which was more than 85 per cent lower than April 2019.
The impact of the pandemic was observed in almost all sectors of Bangladesh’s economy, especially the industrial and service sectors.
In recent years, the industrial sector has emerged as the most important component of the economy and caters to the domestic market, export earnings and job creation.
The average growth in manufacturing was more than 10 per cent from 2010 to 2019 and was 14.2 per cent in 2019, which came down to a mere 5.84 per cent in FY20.
Transport and communication, community and social services, bank and financial intermediaries, tourism, and wholesale and retail trade have all faced economic sudden stop.
With a shrink in demand, COVID-19 has also impacted private domestic and foreign investment, savings and external trade.
Agriculture is one of the only industries that have kept up performance because of a bumper harvest of rice and unhindered output in other sub-sectors such as fisheries and livestock.
The stimulus packages have been designed to help export-oriented industries, shipment credit, agricultural sector, and low-income groups, including farmers and micro and small enterprises to survive.
The country’s total exports strongly bounced back to $15.92 billion during July-November period in FY21 which was 0.93 per cent higher than $15.77 billion exports in the same period a year earlier.
RMG exports also managed to make a strong comeback with $12.89bn billion exports in the first five months of FY21 even though it remained 1.48 per cent low compared to $13.08 billion apparel exports in FY20.
Remittances inflow, on the other hand, reached $10.90 billion in the first five months, registering an increase of more than 41 per cent despite the ongoing Covid-19 pandemic.
Prof Mustafizur Rahman thinks that even after a turnaround, the economy has to face challenges of export-import, FDI and private investment in 2021, which he said are yet to reach pre-Covid-19 level.
Lowering the inequality will also be a major challenge for the economy in the coming days, he added.
He said a sluggish trend was prevailing in employment and private investment before the start of the pandemic and it also persists now.
“Although remittance has gained, the problem will lie in the labour market as many returned from abroad after losing jobs,” Prof Mustafizur pointed out.
The crisis also opened up a new window of opportunity before the country in areas like digital platform-based business or e-commerce, according to him.
But its further expansion will need picking up new schemes for enhancing internet speed as well as the country’s digital capacity, he suggested.
“Not only Bangladesh but also the whole world is going through a historical crisis. The world has not seen such a crisis in the last 100 years or may not see in the next 100 years,” Dr Hossain Zillur Rahman, a former adviser to a caretaker government.
He thinks that economic losses of Bangladesh compared to that of other countries have been low. But he saw a lack of advance preparation in health sector although the pandemic started much earlier.
He suggested taking necessary preparations, especially in the health sector so that any sudden shock can be successfully overcome in future.