Wednesday, 6 July, 2022

Inflation halts economic recovery of low-income group: Study

Inflation halts economic recovery of low-income group: Study

The ongoing inflationary pressures have negatively affected the real income, food security, and essential expenditures of the low-income households in Bangladesh, said a study report.

Power and Participation Research Centre (PPRC) and BRAC Institute of Governance and Development (BIGD) jointly conducted the study recently. It found that the trend of "new poor" remains high at 18.54 percent in May 2022 due to inflation and slow recovery among vulnerable non-poor.

 PPRC Executive Chairman Dr Hossain Zillur Rahman and BIGD Executive Director Dr Imran Matin revealed the findings of the study titled "Inflation, Coping, and Recovery Challenges" at a virtual event on Sunday. 

The study includes multiple rounds of surveys that reached urban slums and rural people. The surveys were conducted among around 4 thousand households in the fifth round of the work in May this year. 

They showed that per capita daily incomes were steadily recovering after the end of second lockdown—which increased by a 27 percent from August 2021 to January 2022— but have started reversing again by a 6 percent between January and May 2022 due to inflation, disrupting the expected recovery of real incomes to that of pre-pandemic times.

In his speech, economist Dr Hossain Zillur said the inflation has compounded the coronavirus induced disruptions to economic recovery as real income of poorer households is still 15 percent lower than pre-pandemic period.

“Bangladesh now faces a new risk—the reversal of meeting the targets of nutrition and education set in the sustainable development goals,” he said. 

The recent fall in daily per capita real incomes in the urban slums (8 percent) has been sharper than that in the rural areas (3 percent). Livelihoods in urban slums were already more severely affected by the pandemic and recovering more slowly, compared to those in villages.    The inflation has further slowed the recovery in the slums, the report said.   The inflationary pressure also appears to have pulled more women to find work; 40 percent of female respondents in the survey were engaged in income-generating activities in January, which jumped to 52 percent in May, but the longer term is still grim for women—36 percent women in the sample who were working pre pandemic period still remains to out of work.

Regarding the survey, BIGD Executive Director Imran Matin said inflation induced reversal comes within a larger context of multiple prolonged crises.

“The government action for the informal sector and the poor will be critical at this time, and this needs to protect both consumption and production capabilities. Social protection needs to be reimagined to align with our challenges and ambitions,” he said.

Because of rising prices, most of the households surveyed have drastically reduced or stopped the consumption of major food items such as fish, meat, milk, and fruit, since February. Here too, the reduction in quantity and quality of food consumption has been more extreme in the urban slums than the rural areas.

More than half of the households believe that the price hike is due to governance issues. The majority want the government to punish the syndicates and corrupt businesses, while a third suggested reducing prices, particularly for low-income households.  Moreover, since February 2022, two-thirds of the households have reduced non-food expenditures, including a worrying decrease in medical and children’s education expenses. The households are also buying less and buying lower quality goods to cope with the price hike.