The storm over Bangladesh economy has blown over
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Bangladesh might be among only two ASEAN and South Asian economies to join up positive growth in 2020 despite a worldwide recession that's shaping up to be historic in scale, according to Standard Chartered Bank's research team.
"The worst has passed us," said Saurav Anand, an economist of Standard Chartered for South Asia.
The economy faced challenges between April and June,
Now, there are early signs of recovery in a few pockets following the economy started checking from June, he said at a webinar styled 'Standard Chartered Global Research Briefing Media Engagement Session' yesterday.
"Recent monetary data have shown adequate improvement," Anand added.
Edward Lee, the principle economist for Asean and South Asia at Standard Chartered, echoed the same.
"From a GDP growth perspective, the second quarter of the entire year was probably the worst for all countries. The recovery is already there," Lee added.
Bangladesh's economy grew 5.24 per cent in the fiscal year that concluded on 30 June, much better than the grim forecasts made by the multilateral lenders.
The Washington-based multilateral lenders -- the World Bank and the International Monetary Fund -- had forecasted that the economy would grow between 1.6 % and 3.8 % in fiscal 2019-20 for the pandemic-whiplash, as the Asian Development Bank said the Bangladesh economy would expand at 4.5 %.
Standard Chartered forecasted that Bangladesh's economy would expand 5.6 % in fiscal 2020-21.
The slower growth momentum is expected to continue in today's fiscal year although the federal government is expecting a V-shaped recovery and
But the government is aiming for an 8.2 per cent GDP growth, banking on a V-shaped recovery, which entails a leap back to the previous peak after a sharp decline.
Lower growth will partly be driven by slowdowns in key trading partners, with the Eurozone, the united states and the center East more likely to contract sharply in fiscals 2019-20 and 2020-21, the bank said in a press release.
Economic activities plummeted quite somewhat from the finish of March to the finish of May, Anand said. Exports and imports dropped significantly.
Remittances were up in June and July. Exports in July also went up.
"So, the decent amount of data that's coming out is showing that some rate of recovery is underway."
You will find a clear room when it comes to fiscal and monetary policy space to boost growth.
According to Anand, the fiscal deficit would widen to 7.5 % if the growth disappoints.
There exists a room for a rate cut to occur in the monetary policy, he said.
The central bank has recently cut 125 basis points. The money reserve ratio has also been cut to inject liquidity.
Bangladesh will probably maintain a robust forex reserve of near $40 billion in today's fiscal year, providing an excellent buffer to the economy, Anand said.
The low debt-GDP ratio provides much room to the federal government to create further stimulus measures, he added.
The world has been around the midst of an unprecedented crisis, Lee said. Simultaneously, the governments attended up with unprecedented measures, both monetary and fiscal.
When compared to global financial meltdown, the bank operating system is in a far greater situation. But companies wouldn't normally borrow much to get if their demand is subdued, he said.
There's some recurrence of infections in a variety of parts of the world, including in the US, the united kingdom, Australia, New Zealand and Japan. However the governments are now in a far greater position to respond and their health care capacities have expanded.
"The crisis has been unprecedented. Nevertheless, you the governments' responses in conditions if monetary and fiscal steps have also been unprecedented. The support is significant which is a positive aspect."
According to Lee, bringing infections in order ought to be the utmost priority for any country.
As economies reopen, businesses and consumers have to stick to standard operating procedures to ensure the sustainability of the recovery and minimise the chance of recurrence of infections.
"I think you do not want an monetary recovery that starts and stops and starts and stops, that makes it very hard for businesses to arrange for investment," Lee added.
The exchange rate of the taka against the US dollar will remain stable for the rest of the year, said Divya Devesh, head of ASA FX Research at Standard Chartered.
"The external balance situation is pretty supportive. The total amount of payment may very well be in surplus. The record forex reserve shows that the central bank has ample dollars to tide over any difficulties."
On most metrics, Bangladesh scores very highly on reserves adequacy, Devesh added.
Still, there is a lot the government can do to amp up economic activities, particularly if it comes to simple doing business.
The federal government has taken steps to facilitate doing business in the last 3 to 4 years and there is a have to expedite the implementation in the current situation, Anand said.
"The majority of the challenges facing the economy are structural and so are well-known. This is a domestic situation that can be handled."
Bangladesh must ensure less reliance on key monetary partners and the economy is more resilient to withstand any future shocks.
"As the federal government gains more experience in handling the Covid-19 situation, there will be more confidence domestically to turn out, consume and invest," Anand added.
There are various challenges that are not in Bangladesh's hands, said Muhit Rahman, head of financial markets of Standard Chartered Bangladesh.
The country is exposed to Europe and the united states for exports.
As the entire external debt to GDP ratio is very low, the united states is in a good position to soak up a V-shaped recovery and Bangladesh has a significant chance of experiencing international liquidity.
"This is a distinctive opportunity. I don't believe any other country will be in that position. We are very optimistic about the recovery of Bangladesh," Rahman added.
Earlier, the economists spoke at the 2020 Bangladesh session of the Bank's Global Research Briefing series. A lot more than 300 clients joined via video-conferencing.
Speaking at the function, Shibli Rubayat-Ul-Islam, chairman of the Bangladesh Securities and Exchange Commission, said: "We expect Bangladesh to have a V-shaped recovery post-COVID-19 reaching back to more than 8 % GDP growth trajectory within 2021."
Bangladesh entered these turbulent times on a much more robust footing compared to a lot of its peers, because of low external debt, low overall public debt and comfortable debt service capability because of its healthy foreign exchange reserve, said Naser Ezaz Bijoy, chief executive officer of Standard Chartered Bangladesh.
"By working together across the board, we are able to leverage our solid monetary fundamentals and the innate resilience of our communities to quickly regain lost ground and achieve all our ambitions and aspirations for our nation.
"While global economical recovery seems gradual and you will see uncertainties, we have to have robust financial risk management practices and adopt a culture of hedging against adverse movements in interest, foreign currency and commodity prices."
This allows businesses to reduce uncertainties around volatility, he added.
Bitopi Das Chowdhury, head of corporate affairs, brand & marketing at Standard Chartered Bangladesh, also spoke.
Source: https://www.thedailystar.net