As the global economy is facing the ‘Great lockdown’ recession caused by the COVID-19 pandemic, the economy of Bangladesh too, has been hit hard. With only 15% of the country’s population making more than USD 6 per day, Bangladesh stands in a vulnerable position to tackle the economic impact of COVID-19. This article tries to visually present the impact of the pandemic on different economic sectors in Bangladesh.
Forthcoming Economic Derailment
The nationwide shutdown which has been extended till May 5 has led to shocks for both the formal and informal sectors. 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.
Gloomier Stock Market Trends
The global stock market took a major hit with the core indexes Dow Jones, Nikkei, FTSE facing the dismal declines in its history. The stock market in Bangladesh, which had been on a downward trend for the last few months, has recently witnessed massive falls fueled by the outbreak as frightened investors went for huge selloffs. DSEX, the benchmark index of the Dhaka Stock Exchange plunged 849 points, or 19.07% in the January-March quarter exhibiting the most depressing first quarter in its history.
Declining Remittance Inflows
The impending economic recession hitting the Gulf and Western countries places a big threat to the wage earners’ remittance inflows, one of the main pillars of economic growth. The economic shutdown in these countries has been already affecting the remittance of expatriates, showing a downward trend in the first quarter. Many of the migrants have already lost their jobs which will further affect the rural economy of the country owing to the dependence on remittance.
Staggering Unemployment Numbers
Due to the economic halt in place, millions of people are at unprecedented risk of losing jobs in several economic sectors such as readymade garments, dairy, poultry, transportation, tourism, etc. Readymade garments industry has already been projected to lose USD 1.6 billion due to the cancellations of orders.
Low mobility in the cities has resulted in a loss of jobs in the transportation sector employing more than 5 million people. The livelihood of workers in the formal economy will be significantly affected but more worryingly, more than 50 million workers in the informal sector will face even direr consequences of the lockdown amidst the pandemic.
Rural Economy Approaching Economic Fallout
Decreased demands in poultry, dairy, fisheries have led to a drastic price drop in the respective sectors. On top of that, due to industrial shutdowns, garments workers and urban day labourers lost their jobs. Consequently, a large number of people with no income source moved from cities to villages which pushed the rural economy at a vulnerable stance. Egg price fell 45%, milk price dropped around 35%, production of dry fish reduced by 40% and vegetable price decreased significantly. Sizable and real-time support from the Government is needed to forestall the upcoming social and economic crisis in the rural sector.
Decelerating Private Sector Credit Growth
While banks were trying to adjust with the directive of 6% and 9% caps 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. The supply chain disruptions in different parts of the world will exacerbate demands for credit by the private sector.
Aviation Industry Among Hardest Hit
The worldwide travel bans amid the COVID-29 outbreak has had severe adverse effects on the global aviation industry. It put the airlines in Bangladesh under extreme financial pressure as well. In a chain reaction, other sectors dependent on airlines such as readymade garments, labor market tourism and hospitality, etc have been affected. The number of flights has drastically dropped after the lockdown as almost all the flights were suspended.
The local airlines Biman Bangladesh, NOVOAIR, US-Bangla combined have incurred losses of BDT 3.5 billion. Biman Bangladesh has cut 70% of flights on international routes and the number of passengers on domestic routes fell by 25-30%.
Tourism & Hospitality Industry In Trouble
According to the Tour Operators Association of Bangladesh, the tourism sector in Bangladesh is projected to lose BDT 57 billion, putting 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.
As aviation, tourism and the hotel industry are interlinked, with the downfall of the prior two, prominent hotels have been facing the chain reaction. Travel restrictions and flight cancellations have led the occupancy rates of luxury hotels to decline by staggering amounts
Building Readiness For A Post-COVID-19 Bangladesh
The economic shutdown in countries owing to the COVID-19 pandemic has been on its course to cripple the global economy. Bangladesh should look forward to fighting this battle with collaborative efforts from the public and private sectors. While designing the stimulus packages, industries should be prioritized according to their economic vulnerability.
The Government of Bangladesh has introduced a reasonable amount of stimulus packages so far but the effectiveness of the packages to stimulate the economic growth in the post-pandemic world still remains in question. Therefore, policymakers should introduce inclusive stimulus packages and ensure effective distribution systems to build preparedness for rapid recovery after the end of this pandemic.
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- 9. Businesses in Cox’s Bazar hit hard by coronavirus – The Business Standard
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