Just the past year in 2019, life was normal with usual human activities, errands, and concerns. There were huge crowds at airports all over the world; people were lost in their busy lives. Everyone was busy in the fight to staying ahead. At the global level, the two most powerful countries were caught in a spiraling rivalry and war of words by their contestations, led by the trade war.
Even the year 2020 started with lots of excitement. Everyone was anxious to move forward with new dreams and prosperity. But suddenly, an unknown enemy in the form of COVID-19 brought the human race to a complete halt. People were locked inside their own house. It stopped schools, colleges, politics, economy, trade war, and took center stage as a pandemic. The entire humanity is now fighting together to control this pandemic. The economy and politics are going through many changes as well.
JP Morgan has predicted that the global economy will witness negative growth in the next two years. According to the Organization for Economic Co-operation and Development (OECD), the growth of the economy in 2020 is expected to be less than half of 2019. According to a Bloomberg report, the corona virus will cause a loss of 2.7 trillion dollars in the global economy, which is equal to the GDP of the entire United Kingdom. There are even fears that the United States, Europe, and Japan could fall into a severe recession.
After the lockdown since March 25, 2020, Bangladesh has also borne the brunt and is not far from this impact. Many economists are of the opinion that the country’s GDP could go down to 4 percent or 3 percent. Last year, Bangladesh’s GDP was 8.15 percent. However, the Asian Development Bank (ADB) expects that Bangladesh will still be in a better position than many other countries in Asia. The garment sector and remittance sector are the two most prominent reasons why GDP is declining, and economic inflow is going low. Both of these are held to be the lifeline of Bangladesh’s economy.
The garment sector, especially garment exports, is one of the biggest sources of Bangladesh’s GDP. Last year, the garment sector export was about 143 billion dollars. The main markets for Bangladesh’s garment exports are Europe and the United States. The whole world is now locked down due to the COVID-19 outbreak. Moreover, because of this lockdown, the markets in Europe and the United States are deteriorating like most countries. Entrepreneurs in the ready-made garment industry say they have already begun to anticipate a decline in demand. Buyers’ orders have also begun to decline. Entrepreneurs in the garment sector in Bangladesh have already said that a large number of orders have already been canceled, and under the circumstances, Bangladesh’s garments sector is staring at a huge loss. With this, unemployment will rise exponentially.
Foreign remittance is one of the major sectors of economic growth in Bangladesh. Till January this year, expatriate Bangladeshis sent 1,105 crore dollars to the country. This index was on the rise. Till January, the growth in remittances was 21.49%. This is 10 percent more than the same period of the previous year. There was good growth in remittances in February as well. However, due to the pandemic, remittances decreased in March by 11.16%.
More than 60% of Bangladeshi workers and businessmen are living in Middle East countries. Even in those countries, economic activities have taken severe blows because of the lockdown, which has led to almost no earnings. Economic growth in those countries has also taken hit. The World Bank has also expressed its concern and said that many workers in Bangladesh are likely to be jobless, and as a result, there will undoubtedly be immense pressure on the state resources.
The month of Ramadan is going on, and traditionally it has been a lucrative time for small scale traders (street-side shops), restaurants, and food vendors in Muslim-majority countries. Due to the lockdown, there has been a massive change in spending during the festival, which will surely have a negative impact on the economy as it has remained stagnant for quite some time. Small scale traders survive throughout the year by doing business at this time. Their future is definitely going to be very tough.
Perhaps the only silver line for Bangladesh’s economy amidst the lockdown is that Bangladesh Bank has a reserve of 33 billion dollars, which will give the country some cushion. In another relief, the Prime Minister of Bangladesh has announced various financial incentive packages worth BDT 95,619 crore for the people and economy of the country, which is 3.33% of GDP. Emphasis has been given on increasing public spending, widening the social security net, and increasing funding. Working capital has been provided through the banking system to protect the affected industries, the service sector, and cottage industries.
It is hoped that if the incentive package announced by the government is implemented correctly, Bangladesh will be able to overcome this economic downturn.
*** The author is a Freelance Contributor and Executive Member, Sampritee Bangladesh ***