This unquantifiable uncertainty is attributable to the COVID-19 pandemic. It is imperative to understand the awareness pattern, possible economic consequences of the combined impact of this international crisis, COVID 19 and suggest certain possible policy measures.
A novel coronavirus is a new rising of coronavirus that has not been previously acknowledged in humans. Coronaviruses are a large family of viruses that cause illness ranging from the common cold to more severe diseases. Common symptoms include fever, cough and fatigue, shortness of breath and loss of smell. More concerning symptoms include difficulty breathing, persistent chest pain, confusion, difficulty awakening, and bluish skin. The time from exposure to onset of symptoms is typically around five days but may range from two to fourteen days.
Most people infected with the COVID-19 virus will experience mild to moderate respiratory illness and recover without requiring special treatment. Older people and those with underlying medical problems like cardiovascular disease, diabetes, chronic respiratory disease and cancer are more likely to develop serious illness.
The best way to prevent and slow down transmission is
a. Stay aware of the latest information on the COVID-19 outbreak i.e.be well informed about the
COVID-19 virus, the disease it causes and how it spreads.
b. Protect yourself and others from infection by
i. Regularly and thoroughly clean your hands with an alcohol-based hand rub or wash them with soap and water.
ii. This virus spreads primarily through precipitations of slobber or exoneration from the nose when an infected person coughs or sneezes, so it’s important to practice respiratory protocol (for example, by coughing into a flexed elbow). Therefore, Avoid touching eyes, nose, mouth and keeping unwashed hands away from the face.
iii. Maintain social distance (avoid contact with others) and stay home as well so far you can. Maintain at least 1 meter (3 feet) distance between yourself and anyone who is coughing or sneezing.
iv. If you have a fever, cough and difficulty breathing, seek medical responsiveness and call in advance. Follow the guidelines of your healthcare provider, your national and local public health authority or your employer on how to protect yourself and others.
v. If it becomes obligatory to go open-air in emergency cases, then use mask, hand-gloves and PPE to protect yourself and your society. Though, there is not enough evidence for or against the use of masks (medical or other) in healthy individuals in the wider community.
vi. As a pre-preventive measure you can drink hot water, tea or coffee on a regular basis. Along with that, you can take boiling water vapor 3 to 5 times a day. Strictly avoid dinking any sorts of cold drinking and eating.
Natural disasters or major humanitarian crises are not unknown to Bangladesh. The country is fighting a venerable struggle against the impact of climate change and currently hosts the world’s largest refugee camp. Bangladesh and its people have shown tremendous flexibility in facing them. The COVID-19 pandemic, however, is a crisis of a completely different nature and magnitude.
Since the situation is evolving every day, economic estimates can only provide a magnitude of the impact. The actual consequence will depend on the extent of the spread and length of the duration of the outbreak and how quickly policymakers can take action to alleviate the health and economic damage. In general, Bangladesh’s economy will be significantly impacted by it. The ADB has estimated that Bangladesh will lose about 1.1 percent of its GDP in the worst-case scenario-when the epidemic will last at least for six months. It denotes that coronavirus can take away USD 3.02 billion from Bangladesh’s economy. Additionally, it is also being captured that there could be about 8 million job losses due to a global economic depression.
Its economic consequences may be as follows:
- All countries that are major markets for Bangladesh’s most vital tradable goods, such as readymade garments which have lately emerged as the most prominent one in our economy are affected by COVID-19. Therefore, the global economy is expected to diminish their contact and that would carry a great negativity in our economy.
Again, the stock market in Bangladesh, which had been on a downward trend for the last few months, has recently witnessed massive falls driven by the occurrence as worried investors went for huge selloffs in this situation.
- Lockdown currently imposed in Bangladesh like many other countries of the world. The current scenario expresses that; it will take several months for market confidence to be restored in these economies. The implication is that nearly six million workers in Bangladesh’s formal sector – which is largely manufacturing – will be without steady work for an extended period.
According to the Tour Operators Association of Bangladesh, the tourism sector in Bangladesh is projected to lose BDT 57 billion, placing the jobs of around 40 million people directly or indirectly engaged in the sector at risk. As the economy of Cox’s Bazar is dependent on tourism, the district is on course to lose BDT 20 billion revenue till Eid-ul-Fitr.
- The disheartened oil prices will also lead to a strong hardship of growth in the Middle East and North Africa region, which will get out of bed a world economic crisis and Bangladesh will also be affected by the predicament. Due to COVID-19 pandemic, crisis is already taking place due to the price war between two major oil producing countries. Three among the top five remittance sources of Bangladesh are oil producing country and oil war could also affect the remittance inflow of Bangladesh.
Furthermore, falling oil prices have expected to worsen demand for migrant workers. Oil prices are often an effective leading indicator of inward remittances. History shows that falling oil prices have a lagged effect on remittances of Bangladesh. At present, prices are falling because of reduced demand in various transport and other sectors.
- In the coming months, there can be no doubt that there will be shrinkage in remittances and that these second-degree impacts will also be stroked in the country, affectionately in rural Bangladesh, where families depend on heavily on remittances for their survival. Foreign remittances projected to fall by 22 percent.
According to World Bank data, Bangladesh received $15.5 billion in remittances in 2018, 15 percent higher compared to the previous year. In 2017, Bangladeshi migrant workers sent $13.5 billion back home. Bangladesh was the third highest recipient of remittances in South Asia in 2018, after India and Pakistan, and the 11th highest recipient globally.
Again, Bangladesh has around 10 million workers overseas, with a majority in the Middle East and the US, UK, and Malaysia. Due to travel restrictions as well as an economic slowdown of the hosting country, a lot of panic-stricken Bangladeshis have returned from the foreign country leaving their temporary jobs. After returning to the homeland, a sizeable number of them may have to face up to an unfriendly struggle for survival.
- It could be anticipated that, a sharp economic nose-dive in Bangladesh would occur, caused by uncertain economic activity, collapsing trade, and greater stress in the financial and banking sectors. While banks were trying to adjust with the instruction of 6% and 9% tops to interest rates on deposits and loans, COVID-19 has brought a more severe struggle for the financial sector to face. According to Bangladesh Bank data, the private sector credit growth has been declining since the outbreak.
Again, as a result of a major outbreak, businesses will have to overhang operation temporarily for a supply shock. While larger firms may have the resources to pay their workers, many small to medium businesses may not be able to pay their wage bills. Additionally, either due to the loss of demand in the international market or due to the suspension of operation, many businesses may not be able to pay the bank interest/installments; it will make a pressure on banks’ liquidity.
The impact of the COVID-19 pandemic will be felt not just on the national economy but on the household economy of millions of Bangladeshis. Daily wage earners have been badly smash; many have nothing to live on now and are unable to buy food for their families. Hunger, malnutrition, and other problems that have always plagued Bangladesh are composed to strengthen as a result of the lockdown.
- There exists a possibility of declining in national and global demand for manufactured goods. Especially the manpower and the garment sector would seriously be troubled. Because, Ready-made Garments (RMG) companies that buy from Bangladesh are literally closing doors all over European and American cities. Private sector investment will also fall and it will create a risk of being unemployment and additional poor would be created in the economy i.e.it will expand poverty.
- The impact of the pandemic will knockout inflexible low-income people, especially informal workers in the hospitality, retail trade, and transport sectors who have limited or no access to social safety nets. Therefore, it will strengthen economic inequality in the society.
On the other side, According to the government decision various factories are shutting down and workers are going back to the villages. This creates pressure on the rural economy and urban-rural economic linkages are becoming disrupted.
- As a result of lower production and unemployment it could be forecasted that, the projected GDP growth of 8.2 per cent for 2020 may decline by 0.2 per cent to 0.4 per cent according to preliminary estimate of Asian Development Bank (ADB) released on April 03.That is, economic growth may calm down somewhere between 5 to 6 percent.
According to the International Monetary Fund, the real GDP growth of Bangladesh is projected to decelerate to 2.0% in FY 2019-20 driven by falling readymade garment exports, lower private investment growth and wider disruptions due to COVID-19. A reduction in economic growth will predictably lead to a severe increase in the poverty rate.
- The number of vulnerable persons, who need assistance – may double from 20.0 per cent to 40.0 per cent in 2020 (perhaps for a short and temporary period). Poor and vulnerable groups in Bangladesh lack savings and resources to stave off a crisis like the Covid-19 pandemic.
- The exceptional Covid-19 contagion has caused disorders to global trade, business, and education. Bangladesh is equally affected by this contamination. Because it became tough to handle the entire global supply chain that has been interrupted due to worldwide transportation shutdown.
Again, due to reopen manufacturing units, many workers are likely to get back to work at garment factories. They will be joined by urgency factories in Dhaka and other cities from their homes in villages on foot and in crowded vehicles to return to work. These crowds could emerge new vectors of the COVID-19 pandemic in Bangladesh.
- The import and export-oriented companies are also at risk. The largest export-oriented sector i.e. the garment sector has now become a great challenge to the government and the apparel sector also. Because, Globalization has brought countless benefits to the apparel industries of Bangladesh as international fashion companies assign production to cost-effective centers for manufacturing.
Again, Bangladesh’s recent upwelling in FDI that is Foreign Direct investment is largely driven by Chinese investment. Bangladesh’s dependence on China is significant. China has been the largest trading partner of Bangladesh with a share of 18.94 percent of total trade in 2018. China is Bangladesh’s biggest import partner. Bangladesh’s main export commodity, readymade garments (RMG), relies heavily on China for its raw materials. Raw materials for pharmaceuticals are also imported from China. Therefore, As China is the world’s largest manufacturer and exporter; global production will be hampered if Chinese industries are shut down for some time. China is, in fact, the highest supplier of goods to more than 100 countries in the world.
- Of course, one of the hardest-hit sectors is transportation. In fact, there are considerable concerns about compensating staff salaries at a time when all sorts of transportation facilities remains closed down for a longer period. Overall, the current economic situation may seriously undermine the livelihood of the disadvantaged population involving in these sectors.
Furthermore, At times of economic disorder, small businesses and startups are usually fall in a poorest success. Raising funds is difficult as it is, for small businesses and startups. In Bangladeshi startups, although the ecosystem is at an early stage, with a handful of startups responsible for a lion share of funds raised. Fundraising for startups is difficult even in a healthy economy. At the time of the coronavirus, when public detachments are being considered risky and even gold prices have been shaky, startup investing will likely take a considerable punch in the coming months.
In the long run, Covid-19 will make unprotected areas for improvement in our health care system, IT infrastructure, workplace cultures, and adaptability of our public and private sector leadership. The virus may also have the accidental concern of our social protection and emergency response capacity.
- Many enterprises like hotel, catering, cosmetics services, etc. are currently losing a substantial proportion of customers because people are worried about being infected with Covid-19 disease, and this is also due to various restrictions on moving outside. On the other hand, a considerable number of construction workings are falling at risk for being unavailability of the workers, for example – Padma bridge, Metro rail etc. This will carry a pressure on our economy.
Finally it could be said that, the COVID-19 has caused gigantic negative effects on resident’s wellbeing, society, education, and the economy in Bangladesh. Therefore, its impact will hit hard low-income people, especially informal workers in the hospitality, retail trade and transport sectors who have limited or no access to healthcare or social safety nets.
Mercy Tembon, World Bank Country Director for Bangladesh and Bhutan said “The extent of the impact of the pandemic will depend on the duration of the crisis and the mitigation measures taken.”
Ben May, head of Global Macro Research at Oxford Economics said “From an economic perspective, the key issue is not just the number of cases of Covid-19, but the level of disruption to economies from containment measures,”
As the economic damage of the coronavirus outbreak cannot be avoided, policymakers should have to take a few immediate measures to minimize the losses. These may be as follows:
- To minimize short-term economic pain, the government has to establish temporary work programs for unemployed migrant workers, sanctioning debt release measures for businesses and individuals. Government can also adopt temporary spending measures for this purpose.
The government could initiate a job support scheme for workers affected by coronavirus. They should also be provided with working capital and proper training to start small businesses. A special financial scheme for small enterprises may be initiated.
- Bangladesh government should adopt expansionary fiscal policies combined with monetary incentive to keep credit smooth in our economies. A major plus point in the case of Bangladesh is that, fiscal and monetary instruments are already in operation (even though they are not highly efficient), through which these incentives can be executed.
Supportive monetary policies are necessary during this crisis period. That is, interest rates should be lowered or zero for businesses to make up for their losses. Further interest cut should be aimed for small and medium businesses. Hopefully, our government has taken these initiatives.
Again, Along with fiscal measure (tax and subsidy) and utility measures (lower rates), Bangladesh Bank may create a special fund to support the SMEs to fend off the Covid-19 economic crisis.
- The government could increase current social protection allocation of 2.2 percent of GDP to about 5 percent of GDP during this crisis period. Employment generation and poverty alleviation programs could also be generated along with this.
During this crisis, there will be less consumption demand which in turn will slow down the economy. Therefore, continuation of the investment expenditures in the economy is necessary for job creation. But efficiency in such expenditures will be critically monitored. So that, it could provide special benefit to the low-income group.
- There is considerable presence of effective gatherings of public society organizations and NGOs in Bangladesh. They, along with the government, can play an important role in beneficiary identification, delivering resources to poor and susceptible populations and monitoring the incentive implementation. Effective and timely disbursement of funds is significant to tackle the economic and social threats of Covid-19. Bangladesh Bank prerequisites to ensure the sufficient liquidity in the financial sector.
- Essential import items, particularly raw materials price may be high in world economy. In that case, government should immediately look for alternative sources. Though the prices may be higher however, given the essential nature of these items such as pharmaceuticals and medical devices, the government can provide special support immediately.
- Though the banking sector in Bangladesh is not vigorous at this moment, the central bank can help other banks through refinancing arrangements so that- banks could have adequate liquidity to support companies and individuals with loans and other issues. Loans to the affected businesses, particularly the small and medium ones should afford priority. Cash transfer can also be a measure occupied by the government.
- Due to Bangladesh government’s commitment to ensuring quarantine at a time, the official figures of Covid-19 affected persons are low compared to other countries. So, government has to initiate a well-considered stimulus package, speedy monetary and fiscal interventions and a large informal economy. Positively, government has initiated those measures to recover the economic shocks.
- Bangladesh government can create a dedicated cell within the Planning Commission so that, Covid-19-related projects could be approved within very short time and ensure the speedy delivery of cash, goods and services.
- There exists a drastically change in the health sector of Bangladesh. So, the health sector budget could be perpetually increased to 3 percent of GDP from the current allocation of less than 1 percent of GDP. Along with fiscal measure (tax and subsidy) and utility measures (lower rates and delayed payments) government may create special fund and policies for importing medical equipment. Because, financial allocations are needed for strengthening the health system with adequate testing facilities, staff, medicine, beds and other medical necessities. The government should provide medical support to the poor affected people and returnee migratory workers.
- Our finance minister will broadcast its budget for the next fiscal year (FY 2020-21) in June 2020. The budget could familiarize the focus from traditional sectors such as energy and physical infrastructure to social defense, poverty alleviating programs, health assurance and collective health coverage. Programs for Small and Medium Enterprises (SMEs) could also be included.
Our current social protection allocation is 2.2 per cent of GDP and government could increase it to about 4.5 to5.0 per cent of GDP. Employment generation and poverty alleviation programs should attract higher allocation.
- Most vulnerable groups in Bangladesh primarily depend on daily income sources, and the loss of these income sources will have long-term implications. To enforce the social distancing management, the system should be in dwelling hurriedly to ensure that the people have alternative entrance to food and other requirements. Food and cash support for the looked-for population could make available by the government and other motivated organizations and individual persons. From a survey on ‘Rapid perception survey on COVID19 awareness and economic impact’ conducted by BRAC it is observed that, when asked what the best way the government can support the people in need is, 47% of the respondents preferred food, while 20% (19% in Rural, 20% in Urban) wanted cash support. Rural respondents are more interested in receiving food (50% in Rural, 44% in Urban) support.
- The harvesting of ‘Boro’ rice has started in some parts of Bangladesh and will continue till the end of May. Here, government can take the following measures
a. Pay special attention in agricultural value chain and ensure fair price for the
farmers. The procurement price must be declared before the planting season and provide extra payment of certain percent irrespective of quantity sold to the procurement center. This will give additional incentive to the growers. b. Transportation cost could be minimized through various government and NGO
c. Government can ensure the required money for the farmers to ensure smoothly harvesting and processing activities. Our government can do it by advance purchase of crops.
d. Due to existence of a lock-down situation, the excess labor who has returned from the urban area can compensate for the supply shortage created in this resolution.
Government can take a persuasive initiative in this purpose.
- Another major emphasis should be given on the digitization in the educational institutions and digital skills in general. Our educational institutions should have swiftly moved to online classes as off-campus activities are suspended. Our educational institutions are not becoming able to do the same. Because, lack of widespread internet facilities in the root level. Therefore, the government can consider major investment in digitizing educational institutions and enhancing the digital skills of the students and officials.
Finally, any measure designed for the virus affected personnel and businesses should be severely controlled and monitored with full clearness, so that the purposive loan debtors and fake victims cannot take advantage of the facilities provided by the government.
The present Government is now trying to meet the challenge and ensure that this unforeseen threat does not soar into a major national crisis. Moreover, the coronavirus pandemic emerged as a major challenge for the country’s economy at a moment, when most forecasters depend on that the economic stability has contributed to political stability, given strong acceptability to the present Government of Bangladesh
Professor Dr. A.T.M Rezaul Hoque
Department of Economics
Hajee Mohammad Danesh Science and Technology University