In recent years, Bangladesh has been enjoying economic growth among its South Asian peers. Its GDP growth in 2018 was about 7.9 % and in 2019, it was about 8.1% which was the fastest growth rate among the SAARC countries. The huge bulk of this economic growth was due to its RMG (Ready-made-garments) sector and remittances coming from overseas workers. The estimated economic growth in the future was looking bright, but now, it is facing a new problem with the rest of the world, the Covid-19 pandemic. The catastrophic spread of the virus and its deadly effect made it clear that it has the potential to weaken the economy.
RMG contributes about 13 % of the overall GDP of the country and employs nearly 4 million workers. But due to the pandemic, many big companies are cancelling orders and this is creating a dent in the economy of Bangladesh. The biggest buyers of RMG are from USA, UK, Germany and other European countries. They have already cancelled orders which according to BGMEA (Bangladesh Garment Manufacturers and Exporters Association), estimated to about 3 billion US dollars. As orders are being cancelled, the local industries are unable to pay their wages due to which many garments workers are returning to their homes. Moreover, China is Bangladesh’s leading investor for mega development projects and also the supplier of most of the raw materials for its prime sectors. The barriers to imports from China, the original epicenter of the virus, will hurt the export-oriented sectors and disrupt the supply chain. An estimate from the report of Asian Development Bank (ADB) suggests that, about 900,000 people will lose their jobs in Bangladesh. This estimation has already been surpassed as more than 1 million people are now unemployed in the RMG sector. BGMEA have estimated that about 2 million workers in RMG factories could lose their jobs and currently the situation is more than 2 million. So, unless the government takes some swift actions, the economic growth related to RMG could come to a standstill or decline.
Another leading growth factor for Bangladesh’s economy is remittances. There are about 10 million overseas workers and most of them are from the Gulf which is Kuwait, Oman, Saudi Arabia, UAE, Qatar and Bahrain. There are also workers from UK, USA and some European countries. According to World Bank data, Bangladesh received 15.5 billion USD in remittances in 2018, 15 percent higher compared to the previous year. In 2017, Bangladeshi migrant workers sent 13.5 billion USD back to Bangladesh. Bangladesh was the third highest receiver of remittances in South Asia in 2018, after India and Pakistan, and the 11th highest recipient globally. But due to this pandemic, about two-thirds of the people working overseas returned to Bangladesh with more contagions and without any jobs. So a steep decline could be expected in the coming years as small jobs like waiters, plumbers, shopkeepers etc. will take at least one or two years to rehabilitate and people would likely transfer to online jobs like IT infrastructure, free-lancing, outsourcing, web design and online marketing. But the government needs to take a quick strategy to remedy the actual problem.
As of now, The Prime Minister of Bangladesh has implemented many stimulus packages to remedy the declining economy and the healthcare of the people. On 25th March, Prime Minister Sheikh Hasina announced a stimulus package of TK.5000 crore for export-oriented industries in the form of salaries and wages which is to be disbursed thoroughly among the working people. Another stimulus package mounting to about 8 billion US dollars which is almost 2.52 percent of the country’s GDP was revealed in 5th of April. The aim of this package was two folds. First to improve the overall economy decline by loan systems, reviving economic activities, retrenchment and maintaining liquidity in the stock market. It also aims to help out small and medium sized businesses with the help of Bangladesh Bank providing working capital at decent interest rates to keep the cash flowing as this is the prime problem for small and medium businesses. The second objective was to expand social safety-net programs to help those living below the poverty line, meet their basic necessities. The PM of Bangladesh also stated that the government would distribute free food with a focus on the poor and elderly and also help them buy at a subsidized price so as to maintain purchasing power among all groups of people. Bangladesh also took support from IMF and World Bank and sought about 1 billion USD to support its industries, banks and healthcare for its people. As of now, BGMEA under strict rules plans to open a few textiles and garment industries following strong hygienic protocols and limited working people to keep the economy balanced but it is still on speculation. The stimulus packages of the government are improving the overall economy but more emphasis has to be given on the healthcare benefits of the people.
An estimate from Asian Development Bank suggested that Bangladesh would lose 3 billion USD from its 300 billion USD economy which is almost a contraction of 1.1 percent economic growth. Furthermore, a report from The World Bank also anticipates an acute economic drop in each of the region’s eight countries, caused by stopping economic activities, disrupting trade, and stress created in the financial and banking sectors. In contexts of uncertain proportions, the report suggests a ranging estimation, predicting the regional growth will fall in a range between 1.8 and 2.8 percent in 2020 which is downed from 6.3 percent estimated about six months ago. If the predictions were to be true, then this will be the region’s worst performance in the last 40 years, with temporary contractions in economy in all South Asian countries. In prolonged and broad national lockdown situations, the report predicts a worst-case scenario in which the entire region would experience a negative growth rate for the rest of 2020. This diminishing forecast might also linger in 2021, with growth estimation ranging between 3.1 and 4.0 percent, down from the previous 6.7 percent estimate. Only time will tell if these speculations will be true or not. As of now, Bangladesh is not out of the woods yet. Its death toll is still on the rise and as such, people must follow the social distancing protocols now more than ever. With the aid of government and non-government organizations and also the common people, it is possible to minimize the damage done to the people of Bangladesh and its economy so as to not repeat the mistakes of the recession of 2008, preceded before.
Sources:
1. The World Bank
2. The Business Standard
3. The Financial Express
4. BGMEA website
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| Mursaleen Siddiqui https://www.facebook.com/mursaleen.siddiqui.10 |
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