Bangladesh fares better than South Asian peers

Bangladesh economy is in a comfort zone with a 3.51 per cent GDP growth in 2020 when its South Asian peers posted negative growth hit hard by the Covid-19 pandemic.

According to Bangladesh Bureau Statistics (BBS), the economy grew by 3.51 per cent in fiscal year 2019-20, while it has been estimated at 5.47 per cent for FY20-21. Bangladesh’s next-door neighbour India witnessed a contraction of 7.3 per cent in its economic growth, followed by Pakistan 0.47 per cent.

Sri Lankan economy contracted by 3.6 per cent in 2020, while Bhutan‘s economic growth dipped by 6.3 per cent, followed by Afghanistan (1.9 per cent), Nepal (2.1 per cent) and Maldives (32 per cent).

Actors behind positive growth

The government’s quick response and coordinated efforts to combat Covid-19 fallout helped the country’s economy remain positive, defying the adverse impact of the pandemic, economists and business people opined. On the other hand, robust remittance inflows, quick recovery in apparel exports and higher agricultural growth cushioned the economy.

According to Export Promotion Bureau (EPB) data, Bangladesh’s apparel exports posted a 12.55 per cent growth to $31.45 billion in 2020-21 fiscal year, which was $27.95 billion in the previous fiscal year.

According to the Department of Agriculture Extension, all major crops posted robust growth in the last fiscal year.

As per the data, rice production increased to 366 tones in FY20, which was 365 tonnes in FY19, while vegetable production rose to 184 tonnes, which was 172 tonnes in the previous year.

“When the South Asian economies recorded negative growth, Bangladesh’s positive growth showed its strength and competitiveness. It is a good sign for us,” Khondaker Golam Moazzem, research director at Centre for Policy Dialogue (CPD), told The Business Post.

“Our source of positive growth was agriculture, RMG exports and remittance inflow. Agriculture and remittance were stable amid the pandemic, while apparel exports showed quick recovery.”

“With immediate response to address the Covid-19 health risk, there was different types of financial and policy support to combat the fallout of pandemic. These protected the economy from the negative growth despite disruption in the supply chain,” said the economist.

Meanwhile, a Bangladesh Bank research on Covid-19 Pandemic: Policy Responses and its Impact on SAARC Countries stated that financial sector regulators had made coordinated efforts with the government on various fronts by combining fiscal and monetary stimulus, regulatory and supervisory measures and economic policy innovations to overcome the adverse impacts of the pandemic on the economy.

In an immediate response to tackle the economic fallout of Covid-19, the government announced a series of stimulus packages and refinance schemes equivalent to Tk 1,28,440 crore, 4.59 per cent of GDP.

Economists said that the agriculture sector played an important role in better performance. Higher agricultural growth cushioned the economy, while it provided employment to people who became jobless during the pandemic.

What next to retain the growth?

As the pandemic continues, the government has to be careful in retaining the growth by providing fresh stimulus packages and continuing existing policy supports.

“We should focus on the sector which contributed more to the economy to remain floated despite adverse impact and give importance to that sector. As agriculture was the driving force, the government should continue policy support to retain growth, Zahid Hussain, former lead economist of World Bank, Dhaka told The Business Post.

On the other hand, special attention should be given to the new poor to help them recover from poverty and contribute to economic recovery, said Hussain.

Meanwhile, it is crucial to ensure equal treatment in case of providing government fiscal supports.

“Though, there was positive growth, we are noticing discriminatory recovery as the small entrepreneurs did not get enough fund from the stimulus package, while the big business people got more. It will adversely affect inclusive growth,” said Moazzem.

On the other hand, those who did not get funds will face problems in the recovery stage. The government should devise targeted packages for those who are in the recovery phase. As financial and policy support, the government can waive registration fees, gas bills and electricity, said the economist.

On the other hand, cash support should be given to the professionals in the sector which recorded high jobs cut, while the social safety net needs to increase both allocation and coverage, said Moazzem.

To create employment for the lower-income people, the government has to increase public investment in the areas, where there are ample opportunities to create jobs, he added.

“To retain growth, Bangladesh has to resume investment, which is almost at a stagnated condition due to pandemic and other reasons. We should remember that a large and growing local market is the main strength of the economy to maintain GDP growth even during the pandemic or financial crisis in the past,” DCCI President Rizwan Rahman told the Business Post.

Therefore, government policy support should be focusing on this local market. Employment opportunity creation could be a fruitful instrument to keep the economy growing, said Rahman.

This employment creation should be both in the public and private sectors. Entrepreneurship development, self-employment as well as ease of doing business should get the highest priority in this regard, said the business leader.

Enlargement of the export basket and new export market exploration are highly recommended for maintaining and increasing GDP growth, he added.

On the other hand, proper implementation of the packages is very crucial.

“It is crucial to consider how these stimulus packages are being utilised and impacting the economy. These have demonstrated better performance and they will deliver improved results when the management and monitoring of the policies are well managed,” said Sayera Younus, General Manager, Research Department, BB told The Business Post.

Amidst the ongoing crisis, the government should be ready to deliver further economic policy support, said Sayera.

With the previous experiences, regulators should identify their loopholes and be prepared to take timely measures with short-term, medium-term and long-term plans to mitigate the impact of Covid-19, she added.

Short-term recommendations for regulators could be assessing and modifying business continuity plan to maintain operational resilience.

As mid-term recommendation, she suggested continuous monitoring modules for the government’s incentive policy and programmes, using an automated risk assessment tool, and evaluating the program’s effectiveness.

On the other hand, Sayera recommended reassessing the effectiveness of programmes for future crises and innovating strategies for long term benefits.