Bangladesh Economy 2020: Soaring from the rubble

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The year 2020 started out with a cloud of uncertainty hanging over the horizon. The novel coronavirus was spreading in Europe, the vacation spot of over 60 percent exports from Bangladesh, after wreaking havoc in China, its major trading partner.

Bangladesh felt heat of a looming global crisis although virus had not yet made its method into the country.

The awful news came a couple of months soon after. On March 8, the authorities verified the maiden circumstance of Covid infection in the united states. A week later, the primary death from the virus was reported.

Soon, the country's economy, one of the shining stars in Asia, came practically to a halt simply because the federal government imposed countrywide lockdown to contain the spread of the virus.

The primary index of the stock market dropped by 15 percent in under 10 times in the next half of March.

During the nationwide lockdown, thousands lost jobs, poverty charge doubled and several businesses folded up. Profit of the vast majority of the population shrank.

Exports hit very cheap as the importing countries themselves were locating it difficult to preserve their economies afloat. The united states was looking at an unprecedented three-pronged crisis: health, financial and food. 

To protect the people and the economy, the federal government rolled out an enormous Tk 120,000-crore stimulus package, one of the largest on the globe. It capped bank interest levels below solitary digit to help organizations and businesses borrow at a record low rate.

Multilateral banks and bilateral partners poured vast amounts of dollars to cushion Bangladesh.

However the biggest support came from farmers who continue to feed the united states and the migrant staff who proved the grim forecasts wrong, sending residence an archive amount of remittance.

The robust flow of remittance lifted the country's forex reserves to record highs and put the united states on a firm footing.

The reopening of the economy in June was a very bold move and became a judicious one, as the virus didn't walk out control.   

The meals production, remittance, the stimulus package, the reopening, and the uptick in domestic demand and exports put the country on the road of recovery.

"Despite the Covid-19 pandemic, Bangladesh was able to escape a contraction in 2020," UK-based Centre for Economics and Business Research said early on this week. 

Bangladesh's GDP growth is forecast to drop to 3.8 percent in 2020, in comparison to 8.2 percent in the last year. The government debt as a share of the GDP rose to 39.6 percent in 2020, considered low according to the international standards.

The government had a fiscal deficit of 6.8 percent in 2020, which allowed it to spend plenty of money to cushion the economy.

"This could have bolstered the economy previously months," the think-tank explained. 

In addition, it mentioned, "As the harm to consumer health inflicted by the pandemic has been relatively limited, the result of the outbreak on global demand and international source chains signifies that the economic damage has been considerable." 

Regardless of the pandemic, Bangladesh is set to create the third-highest growth on earth and the highest in Asia in 2020, in line with the International Monetary Fund.

In conditions of growth, sole Guyana and South Sudan are before Bangladesh. India's GDP would contract by 10.3 percent and Pakistan's by 0.4 percent.

Of the 190 IMF member countries, only 23 are forecast to post a positive growth in the outgoing year.

Financing Minister AHM Mustafa Kamal said the primary minister had taken effective actions that fuelled household demand and helped people survive the crisis.

Because of this, Bangladesh has been able to maintain the growth trajectory through the crisis, he noted. 

"Other than Bangladesh, you will not find any country found in Asia that is able to maintain progress in every section of the macro-economy," he told The Daily Star.

Zaid Bakht, a previous research director of the Bangladesh Institute of Production Studies (BIDS), explained the impact of the pandemic is not as adverse since it was thought initially.

"The economy possesses weathered the impacts of the pandemic and is currently on the right track for a recovery."

People are looking to get back on the feet again and ride out the financial hardship due to job losses. "They want to do something to generate a living," he noted.

Mustafizur Rahman, a good distinguished fellow of the Centre for Insurance plan Dialogue, remarked that Bangladesh's main indicators such as for example export, import, balance of repayment, credit growth, private sector expenditure and foreign direct expenditure were in a good fragile state even before the pandemic.

"This is largely because Bangladesh's main trading destinations had already been facing the impacts of coronavirus from January."

In Bangladesh, poverty rose to thirty percent and unemployment to 40 percent, Mustafizur mentioned.

The government's massive stimulus package helped the economy, but it is yet to recover fully, he noted.

"A lot of the countries will probably have detrimental growth this year."

Regarding to Mustafizur, the country's reliance about the hardest-hit sectors such as for example export and tourism is normally relatively low compared to other countries. Domestic demand may be the major driving drive behind the economy.

Everyone had warned about disasters in well being, economy and foodstuff sectors. "We needed to worry about health and economy. We performed very well in the meals sector. It is a location of durability of Bangladesh." 

Revenue collection would rise if there have been robust economic activities. But it remains low, signifying trade and commerce possess not returned to the pre-pandemic level, Mustafizur observed. 

The country's export is a long way away from the pre-Covid level, and the import of capital machinery continues to be negative.   

The regulatory challenges must be sorted out, and the planned monetary zones have to be ready, he added.

Zahid Hussain, former lead economist at the World Bank's Dhaka workplace, said the glad tidings are that 2020 is currently in the rear-watch mirror.

"The terrible news is we can not be sure if the unprecedented distress suffered globally in the year gone by is also a thing of days gone by."

The economy is recovering, but it isn't yet back on the right track to a faster and sustainable growth with investments still depressed and external require wavering, he described.

"I hope 2021 will get us back again to a sustainable expansion track as the community economy and household demand change."

Making some recommendations for the times ahead, Monzur Hossain, research director in Bangladesh Institute of Development Studies, said that continue, the federal government should put even more focus on creating careers and bringing more poor people under social safeness nets.

"There should be a far more proactive and innovative role in extending stimulus plans to SMEs [small and medium enterprises]."

Many vulnerable groups have grown to be even even more vulnerable. The federal government should support them, he mentioned.

The finance minister is confident that Bangladesh's agriculture, manufacturing and service sectors will achieve more within the next half a year than what they did within the last six months. 

"Bangladesh won't come under major pressure as a result of second wave of coronavirus like it did in the primary wave."

Asked about further more stimulus package, he stated, "The prime minister is very flexible about it. She'll do whatever necessary."

"We've adopted an expansionary insurance policy and we happen to be pursuing it to achieve our objectives. I don't feel that we are certain to get stuck anywhere."

Referring to the next wave of virus infections, Zaid Bakht said some risk elements surfaced again due to it. "We need to wait to observe how the next wave plays out."

The federal government should keep supporting the economy enjoy it has been undertaking because the pandemic hit the country in March, he suggested.

"We must roll out vaccines to improve the morale of the persons. A mass immunisation program will help the market rebound quickly," added Bakht.

Echoing his judgment, Zahid Hussain said, "Getting a significant mass of the population vaccinated in 2021 would be the key to taming the virus locally.

Optimism is found in the oxygen with the arrival of Pfizer, Moderna and AstraZeneca vaccines that promise a high amount of efficacy found in debilitating the virus.

"Rejuvenating structural reforms, ensuring insurance plan support to efficient enterprises confronted with existential threat as a result of pandemic, and strengthening the cultural safeguard system will be key to accelerating recovery while leaving nobody behind," he noted.
Source: https://www.thedailystar.net

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