Economy showing signs of recovery

With soaring credit disbursement in the banking sector, Bangladesh’s economy is showing signs of recovery from the sluggishness caused by the prolonged effects of the pandemic. The strength and resilience of our economy lie in the hands of industrialists and, of course the huge number of consumers—the key drivers of economic expansion, and diversification. The pent-up demand in the Western economies also fueled the credit demand as export and import are in the growth trajectories, much to the relief of the government and the job market.

Private sector credit growth hit a 30-month high in January this year. In the month under review, private credit growth accelerated to 11.07 per cent, the highest since July 2019 when it was 11.26 per cent, as per the latest data from the Bangladesh Bank. Bankers said that the upward trend would continue in the coming days as industry expansion resumed after the second wave of Covid-19. 

The pandemic, which hit the country in March 2020, stifled the demand for credit. When the crisis reached its peak, private sector credit growth hovered at 8 per cent. Growth stood at 7.55 per cent in May last year, and credit expansion has been rising since then, data from the Bangladesh Bank shows. However, the banking sector credit growth still lags behind the target of 14.8 per cent the Bangladesh Bank set for the whole of the current fiscal year. The growth is getting momentum with the ease of corona-induced restrictions. The shelved industrial plans due to coronavirus are expected to be implemented soon. With the mass vaccination gaining momentum and its coverage expanding, local businesses are opting for more investment.

Export Promotion Bureau (EPB) data showed that Bangladesh earned $44.21 billion last year, a 24.53 percent increase compared to $35.5 billion in 2020. Bangladesh earned $39.30 billion a year before that. The share of the apparel sector, the most significant contributor to the national exports, rose by 30.36 per cent to $35.81 billion last year from $27.47 billion in 2020. In January this year, the single-month export earnings recorded over 41 percent growth to 4.85 billion US dollars year-on-year riding on the readymade garment sector amid the pandemic. Bangladesh fetched $3.43 billion from merchandise shipments in January last year. The January 2022 earnings also surpassed the target set for the month by 19.73 per cent, according to provisional data released by Export Promotion Bureau (EPB). On the other hand, the country’s total imports grew 64.70 per cent year-over-year in Oct 2021, compared with an increase of 53.20 per cent year –over-year in the previous month.

The Business Post in a report published on Tuesday quoted two top bank officials who cited the reasons behind the gradual credit growth in the banking sector. Dhaka Bank’s Managing Director and Chief Executive Officer Emranul Huq said that private sector credit demand rose continuously as industrial expansion resumed after the second wave. NRB Bank Managing Director Mamoon Mahmood Shah said that credit demand increased as normalcy returned to the economy despite the emergence of a new Covid-19 variant. In this regard, the lenders’ opinions give the nation hope of a turnaround in the economy.

The Covid-19 situation is bound to improve with mass immunization, and adaptability being in force. Investment in diverse areas of the economy such as the services sector, IT, hospitality industry, and online ventures could be a real game-changer for those who can foresee the future and embrace modest risks now. Banks and non-banking financial institutions are now awash with huge liquidity. The rates of interest are also very low. Pandemic, or war—neither will persist for long. But business, consumption, and industrial output will not stop. Industrialists with long-term investment plans should capitalize on the current low-interest-rate regime. . Such an opportunity will yield a positive outcome for the economy, as the virus-induced fateful business environment is passing out fast from the scene.