Economy showed sign of recovery in Q3 of FY 2020-21: MCCI

Bangladesh’s economy showed signs of recovery in third quarter of the 2020-21 fiscal year as stimulus packages comforted the business groups backed by steady flow of export and remittances, finds the Metropolitan Chamber of Commerce and Industry.

The trade body also found that the fiscal framework continued to be weak in view of poor achievements, more specifically, both in terms of revenue mobilisation and public expenditure in the quarter. Some of the key economic indicators appeared to be less promising than projected earlier, it said.

The trade body’s Quarterly Review of Economic Situation in Bangladesh also found the rate of inflation in the country under control and foreign currency reserve in a satisfactory position. The exchange rate has long been remained stable while the current account and balance of payments account are also in positive trajectory, it said.

The stimulus package comforted the business groups, from large farms to micro-enterprises, which helped the economy to boost again, the trade body observed.

The inward remittances have huge positive impact on rural economy to sustain the domestic consumption demand, which has multiplier effects on other economic sectors, especially the small and medium industry, it said.

The review said when the country was hoping to move at full speed towards recovery from the fallout of the pandemic, it had to go for lockdown once again that brought back disruptions in the lives and livelihoods for the people with the resultant uncertainty for the economy.

Although overseas employment sector is now facing a blow, about two lakh workers went abroad with jobs in the past nine months of the current fiscal year (July-March of FY21) after the employing countries withdrew travel ban on migrant workers from Bangladesh, said the review.

About 49 per cent of the pandemic-hit internal migrants returned to their roots during the Covid-19 period for massive job cuts, non-payment of wages and decreased salary, the review adds.

In its sector-wise review, the trade body said due to slower economic activities, caused mainly by Covid-19 in the previous months, the country's industrial sector recorded a lower growth of 6.48 per cent in FY 20, compared to 12.67 per cent in FY 19.

The share of the industry sector in GDP increased slightly by 0.36 percentage points to 35.36 per cent in FY20 from 35.0 per cent in FY19.

In the broad industry sector, the manufacturing sub-sector recorded a lower growth of 5.84 per cent in FY20, compared to the previous fiscal year’s 14.20 per cent. Within manufacturing, the large and medium scale industries sub-sector performed poorer than in the previous fiscal, growing at 5.47 per cent in FY20, than the 14.84 per cent in FY19, the review said.

The small-scale manufacturing industries grew at 7.78 per cent in FY20 against 10.95 per cent in FY19. However, the share of the manufacturing sub-sector in GDP increased to 24.18 per cent in FY20 from 24.08 per cent in the previous fiscal year, it added.

In agriculture, only Tk 34.66 billion or 69.32 per cent of loan was disbursed as on January 31, 2021, according to Bangladesh Bank data. The slow disbursement of the farm loans prompted the central bank to extend further the deadline for banks to deliver the fund to 30 June 2021 from 31 March 2021.

The disbursement of agricultural credit and non-farm rural credit by all scheduled banks in July-March of FY21 stood at Tk 18,513 crore, representing an increase of 9.40 per cent from Tk 16,922 crore in the corresponding nine months of FY20. All scheduled banks have achieved nearly 70.41 per cent of their annual agricultural loan disbursement target (Tk 26,292 crore).

The power supply situation improved in the quarter under review but the demand for power shot up, too. The countrywide electricity generation on March 31 during the day peak was 8,443 megawatt (MW) and evening peak was 9,453 MW. The installed and the derated (actual) capacity were 21,967 MW and 21,219 MW, respectively. Overall electricity demand on March 31 was 11,877 MW and load shedding remained zero, the review said.

Tax revenue collection by the National Board of Revenue grew by 7.31 per cent in July-March of fiscal year 21. The revenue collection lagged behind by Tk 487.37 billion or 21.40 per cent against the target of Tk 2,277.64 billion set for July-March of FY21.

The implementation rate of the Annual Development Programme in July-March of FY21 was the lowest in more than a decade. According to the Implementation Monitoring and Evaluation Division data, 58 ministries and divisions could spend only Tk 877.35 billion or 41.92 per cent of the revised allocation of Tk 2,092.72 billion in July-March of FY21 in the aftermath of the Covid-19 pandemic. In the corresponding period of the last fiscal, Tk 907.04 billion was spent, which was 45.08 per cent of the revised outlays (Tk 2,011.99 billion).

Trade deficit widened by 9.49 per cent to $11.80 billion in July-February of FY21 from $10.77 billion in July-February of FY20 because of rising import payments amid the economic slowdown. In these eight months, exports decreased by 1.28 per cent while imports increased by 1.91 per cent.

Such import payments also pushed up the current account surplus significantly supported by the robust growth of inward remittances. The overall balance also achieved a remarkable surplus of $6.88 billion in the first eight months of the current fiscal year in comparison to surplus of US$21 million a year earlier, said the review.

The stronger current account balance and the loans from multilateral lenders helped boost the overall balance of the balance of payment, it said.