Bangladesh faces challenge in maintaining domestic demand

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The federal government is finding it very challenging to maintain the amount of domestic demand as a result of people’s eroding purchasing powers amid the shutdown extended to tackle the coronavirus pandemic.

Economists said the shutdown since March 26 made almost all of the country’s 6.1 crore labour force jobless and forced thousands of small and medium enterprises, the key driving force of the economy out of production.

The shutdown has recently surpassed the impacts of protracted blockades of 2014 and 2007.

The unprecedented shutdown also led to halving the country’s GDP growth, rattled the demand and offer chains and created huge unemployment, they said.

Banning all modes of transports across the country also rendered a large number of staff unemployed, said the worried economists

They called the Tk 5,000 crore stimulus fund announced for the export oriented sector and distribution of food assistance at subsidised prices as definately not enough to overcome the monetary crisis.

Former Bangladesh Bank governor Salehuddin Ahmed said the central bank should immediately increase money supply which consists of instruments to assist the affected economic sectors.

The federal government should suspend the implementation of less important projects and utilize the fund to greatly help the persons increase their purchasing power, he said.

London-based Economists Intelligence Unit has recently warned that Bangladesh’s gross domestic product growth would slow down to 3.5 per cent in the current fiscal as a result of coronavirus impact  against the projection created by the government in June 2019 that the united states was set to achieve 8.2 % growth in fiscal 2019-20.

The closure of factories and businesses resulted in a supply-side shock and the next layoffs will exacerbate the demand shock, said the EIU.

The Asian Development Bank has projected that the Bangladesh economy might lose 1.10 % of its GDP, or $3.02 billion, furthermore to 8.95 lakh job losses due to the coronavirus pandemic.

Former finance secretary Mohammad Tareque said the economy would face multi-dimensional impacts which would exceed what the country faced through the Liberation War.   

He said that coordinated efforts that was created by Bangladesh to offset the impacts of the 2008 global recession was missing now.

The federal government should involve all regardless of opinions to face the existing crisis, said Tareque, now working as director of the Bangladesh Institute of Governance and Management.     

The adverse impacts of the coronavirus has hit when almost major monetary indicators- -exports, imports and revenue income - excepting inflow of remittance were in negative trend.

As major sources of remittance in Middle East have been also hit by the pandemic, the united states received 11.83 per cent less remittance to $1.29 billion in March 2020 from $1.46 billion in March 2019. 

Centre for Policy Dialogue distinguished fellow Mustafizur Rahman said the falling remittance was a major blow for the resource short country, also facing capital flights.

He said earnings generation would go down further and handicap the government’s options to run stimulus package for the afflicted sectors.

He calculated that the federal government would need fund near to the size of the current budget to match with the stimulus package announced by developed countries.

In an article ‘Coronavirus is coming for the world’s poor’, the World Economic Forum said that minimal developed countries lacked the economical resources and medical infrastructure to tackle the current crisis.

Bangladesh Institute of Development

Studies director general Khan Ahmed Sayeed Murshid said that the existing crisis and its monetary impacts would be greater than days gone by politically enforced road blackades.
Source: https://www.newagebd.net

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