Covid-19 And The Economy: Where in relation to recovery are we?

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The year 2020 is a disappointment due to the Covid-19 pandemic. And one among its many downsides is seen on the global economy which, in line with the International Monetary Fund (IMF), is set to contract by 4.9 percent in 2020-with the IMF saying in its June report that "baseline projection rests on key assumptions about the fallout from the pandemic."

The Indian economy is estimated to shrink by 10.3 percent, Sri Lanka's by 4.6 percent and Pakistan's by 0.4 percent. Meanwhile, the IMF expects Bangladesh will defy the chances and has estimated its GDP increase by 3.8 percent which is pretty incredible.

Despite the very good news, per capita income in Bangladesh is expected to fall by 2.9 percent according to the Bangladesh Institute of Development Studies, the pandemic has resulted in 13 percent of folks losing work and a reduction in household income, pushing 16.4 million new persons under the poverty line. Much of the damage has been done in the professional and services sectors. In recent years, the commercial sector has emerged as a significant driver of the economy, especially in creating jobs. Between 2010 and 2019, average growth in manufacturing was a lot more than ten percent and was 14.2 percent in 2019. This season, however, that sharply declined to 5.84 percent.

Moreover, foreign direct investment (FDI) to Bangladesh declined by 31.79 percent to USD 1.15 billion in the first half of the entire year due to Covid-19. There is absolutely no dearth of other data showing how detrimental it's been for the economy. However, perhaps do not require fully capture the monetary suffering, nor its resulting human suffering. Yet, one can still say that Bangladesh is doing better than a lot of the world at this moment of crisis-for example, global FDI flows fell 49 percent to USD 399 billion during January-June 2020. And as stated earlier, growth globally has been hampered a lot more severely than in Bangladesh.

With a month and a half left in the calendar year, it appears that the global economy is finally prepared to bounce back, and that may only be good for Bangladesh. Additionally, the Bangladesh economy can be showing signs of recovery. Exports, for example, plummeted in March-April and stayed there in May. By July and August, however, it had returned to its corresponding period in 2019. And remittances, too, have done very well, working as a "countercyclical factor", according to Dr Ahsan Mansur, executive director of the Policy Research Institute of Bangladesh.

The bad news is that the recovery is still in its early stage and is extremely vulnerable-especially to a potential second wave of Covid-19, which authorities fear could derail Bangladesh's feeble monetary recovery up to now, reduce fiscal space and constrain public expenditure, in addition to prove to be exceedingly harsh on the indegent and low-income groups.

According to experts, the lockdown enforced by the federal government earlier in the entire year destroyed half of the GDP growth potential of the last fiscal year, which ended in June, together with undid the gains created by Bangladesh with regards to poverty decrease in the last handful of decades. "The next wave will be more painful compared to the first one and it would rub salt in to the wound," if we aren't careful, according to Zahid Hussain, a former lead economist of the World Bank's Dhaka office. Therefore, he believes it to "be a wise strategy for the federal government to avoid the next wave instead of looking at if the economy can bear it or not."

And he isn't the only person. Dr Fahmida Khatun, Executive Director of the Centre for Policy Dialogue, said a significant second wave would further delay any monetary recovery and another round of low business activity and the resultant low income from businesses would reduce tax assortment of the National Board of Revenue. This, "subsequently, will certainly reduce the fiscal space of the government and could constrain the government's expenditure."

For that reason, it is crucial for the federal government to take every precautionary measure in order to avoid a second wave. This includes awareness campaigns in order that people continue to follow all the necessary health and safety rules. The federal government must equip hospitals with every facility had a need to provide good healthcare to people. Only recently, this newspaper reported the way the authorities are yet to equip all hospitals with central oxygen systems-despite likely to install them months ago. This kind of attitude won't do. The government must be proactive in trying to prevent the disease, instead of focusing on its symptoms.

From the economic side of things, the government has already taken steps to counter the backward slide. It has started 19 stimulus packages worth about USD 12 billion-accounting for 3.7 percent of GDP-that are created to help export-oriented industries, shipment credit, the agricultural sector and low-income groups, including farmers and micro and small enterprises. However, except for the RMG sector, none of the other sectors have already been able to reap their benefits satisfactorily. The federal government needs "to determine why the stimulus packages for the CMSMEs failed to deliver the expected results," according to Hossain Zillur Rahman, executive chairman of the energy and Participation Research Centre, and take appropriate measures to make certain that every penny of public money is well spent-especially given having less manoeuvrability that the federal government has with regards to fiscal space.

The bad news is that the path to recovery is a long and grinding one. The glad tidings are that the worst is perhaps behind us-if we are disciplined and diligent inside our work.

Source: https://www.thedailystar.net

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