COVID-19 is one of the greatest global disasters in living memory, killing millions of people and causing continued economic damage in dollars. Global lockdowns and economic stagnation along with a 66-day public holiday initially in Bangladesh due to the Covid-19 epidemic have resulted in disruption of the country’s economic activity. The economy showed signs of recovery in the third quarter of fiscal 2021. However, Bangladesh faced significant economic stagnation due to the resurgence of COVID-19 with a record number of deaths and infections in the COVID-19 as he expected to pick up the pace. of the economic recovery after the fallout.
Bangladesh’s economy has shown signs of recovery supported by a rebound in exports and a significant flow of remittances. Bangladesh experienced impressive GDP growth of 5.24% (provisional) in FY19-20 amid the subversive impact of OVID-19. Bangladesh’s exports grew significantly by around 502.75% to $ 3,134.38 million from April 2020 to April 2021. Exports grew rapidly after the pandemic, which is a great sign of economic recovery. . According to data from the Bank of Bangladesh, imports also rose 37.03 percent to $ 420.71 billion. The economy of Bangladesh is growing stronger through the export of its workforce to various countries around the world.
Remittances hit a record high of $ 2,171.03 billion in May 2021 amid the pandemic. Foreign exchange reserves have also shown signs of improvement as they hit an all-time high of $ 46,391.4 billion in June 2021. Agricultural productions perform decently in the event of a pandemic, but farmers have suffered. poor functioning of the supply chain. The multinational bank said in a report that Bangladesh’s debt-to-GDP ratio could reach 40% in FY21, but would remain in a comfort zone compared to its peers. This scourge generates a crisis in the banking sector by increasing the rate of NPL. This is quite true for developing economies with poor financial market architecture. The volume of NPL increased by more than 7% to reach 950.85 billion Tk between January and March. This is of great concern to the economy as the continued growth of NPLs puts the economy at great risk. As Bangladesh recovers from the economic crisis around this time, the second wave of COVID-19 hit the economy hard.
Bangladesh’s exports fell 0.83% to $ 3,108.09 million in May 2021. In June, exports increased 15.07% to $ 3,577.49 million, or 2.52% less than the target amount. Remittances show a negative sign, declining 10.60% to $ 1,940.81 in June, posing a threat to maintaining a healthy economy as exports and remittances are the two main drivers economy. Bangladesh Bank fears that the banking sector with lower asset quality due to a higher level of non-performing loans and poor profitability will further ruin the performance of the coming quarter and worsen the performance of banks , which has a shocking effect on the country’s economy. On the other hand, according to the joint report of the Center for Research on Power and Participation (PPRC) and the Institute for Governance and Development of BRAC (BIGD), a significant number of people who fall below the poverty line during of the first wave of COVID-19 were unable to return to their former status and an additional 24.50 million people became poor in March of this year.
A survey by the South Asian Economic Modeling Network (SANEM) found that the country’s poverty rate fell from 21% to 42%. According to the PPRC-BIGD report, 21% of people have become new poor and some around 15% may return to their old position after restarting business. But unfortunately the situation deteriorated when the second wave of this virus hit so hard and it will be a lot to deal with the severe impact of the damage. In dealing with COVID-19, Prime Minister Sheikh Hasina proposed a big strategic step by launching stimulus packages to keep the economy intact and declared 23 stimulus packages with an overall expenditure of Tk 1.24 trillion, or 4 , 44% of GDP, including two new packages to boost SMEs and develop the standard of living of populations. Another joint investigative report conducted by SANEM and the Asian Foundation on May 2 found that 22% of targeted businesses benefited from government-declared stimulus packages during the COVID-19 outbreak, 69% did not received no incentive while 9% did not know.
To keep the economy alive, the government should resort to the following policy options to enable the recovery. First, a sector approach must be followed to assess the troubled sector and execute the effective policy to support the sector in question. Second, the government should declare additional stimulus packages in the form of loans with a lower interest rate for a long period and should extend the coverage of export development on an immediate basis to stimulate the sectors. Third, ensure a good distribution of stimulus incentives as it is very crucial to facilitate future recoveries. Fourth, the government should revert to the traditional bank-led funding model and continue to focus on capital market instruments such as commercial paper, zero-coupon bonds and Sukuk bonds for long-term funding, which makes the financial sector more dynamic by attracting local and foreign investors. Fifth, an ongoing vaccination campaign should be carried out to take 80% of the people under this campaign by December of this year, which would give us a competitive advantage in the RMG industry by capturing a new international market. Finally, the private sector should also play a vital role here in this situation alongside the government which should play the key role in ensuring the development of infrastructure, strengthening the labor market and attracting private investment carrying out the necessary reforms.
The second wave of COVID-9 lasted for a long period of time, causing severe damage to developing economies in Bangladesh. Bangladesh has positive economic engines that have kept the economy alive through unprecedented times. We saw record remittance flows and foreign exchange reserves which helped weather the economic shock. Government-sponsored stimulus packages for small businesses have facilitated a faster recovery in the economy. Appropriate policies and strategies minimized the adverse effects of this scourge and revived the economy to pre-pandemic levels.
BBA & MBA writer (major in finance), Chittagong University