Home ›› 15 Jul 2021 ›› World Biz
Bangladesh’s economy showed strong resilience amid the ongoing Covid-19 pandemic showing signs of recovery riding on a rebound in export-import, strong remittance inflow and healthy forex reserve.
But the overall recovery trend will greatly depend on Bangladesh’s success in mass inoculation by vaccinating at least 80 per cent of its population by March next year.
After a 17 per cent decline in FY20, Bangladesh’s export earnings have registered a 15.10 per cent growth to $38.75 billion in fiscal year 2020-21.
According to the latest Bangladesh Bank (BB) data, imports during July-May period stood at $54.23 billion, which surpassed imports of FY20 of $50.69 billion.
On the other hand, imports of 11 months of the last fiscal year are also very close to imports of FY19, which was $54.43 billion.
Amid a slower economic growth, revenue collection recorded a 17.43 per cent growth to Tk2.56 trillion in FY21 against Tk2.18 trillion in the previous fiscal year.
Although the number of outbound migrant workers slowed, remittances inflow posted stunning growth.
Remittance inflows rose by 36.13 per cent to $24.78 billion in FY21, which was $18.20 billion in the previous fiscal year.
The powerful agriculture sector gave a big boost to the economy during the Covid-19 pandemic with a steady supply of foods.
According to Department of Agricultural Extension, Bangladesh’s rice production increased by 5.77 per cent to 3.85 crore tonnes in FY21, which was 3.64 crore tonnes in FY19.
“For a better recovery, controlling the spread of Covid-19 is a must while the biggest challenge is to make vaccines available,” Mirza Azizul Islam, former adviser to caretaker government, told the Business Post.
Rural people are unwilling to be vaccinated and it is not possible to bring the people under vaccination coverage through app-based registration as their tech knowledge is not up to the mark. The government has to take the service to people’s doorstop, he added.
“There is growth in major economic indicators mostly exports, imports and remittance and it is positive that the economy is showing resilience to some extent. But it is not much and beyond Covid-19 pandemic level,” said Ahsan H Mansur, Executive Director of Policy Research Institute.
The government narrative and reality are not same, he said. There should be a common ground. Research showed poverty rose to 42 per cent but the government does not agree.
“Still export earnings is below the pre-pandemic level but there are signs of recovery. With massive vaccination in exports country, the demand for goods increased and the buyers are placing more orders,” BGMEA President Faruque Hassan told The Business Post.
So, we are on the right track to recover from the pandemic as buyers are fully confident in our capacity and commitment to deliver goods in time, said Hassan.
The government’s support for smoother export and import of raw materials as well a continuation of existing policy are needed, he added.
Bangladesh’s forex reserve has exceeded $46 billion, which gives a strong message about the country’s capacity to foot import bills and other.
“Bangladesh’s forex reserve has exceeded $46 billion, which provides an important cushion for underwriting import demand, an equivalent to 11 months of imports, maintaining exchange rate stability and underwriting debt servicing and other forms of liabilities,” said Mustafizur Rahman, distinguished fellow of the Centre for Policy Dialogue (CPD).
How recovery may look like
Everyone has been wondering when the Covid-19 pandemic will be over or when the economy will recover from the fallout.
Answers to these questions largely depend on the country’s capacity to inoculate people massively within a shorter period.
Bangladesh’s economic recovery gained momentum but is projected to be highly uneven. The recovery line may be zigzag as it varies greatly due to change in infection rate and vaccination progress.
“Economic recovery is an evolving scenario. There are few domestic and external factors that define the recovery process,” CPD Executive Director Fahmida Khatun told The Business Post.
“It depends on the nature of global demands and people’s incomes. If people do not have enough money to buy, consumption would not peak as well as demands.”
Although it was thought that the recovery will be ‘V’ or ‘K’ shaped but recurring virus wave and the frequent change in variant with high infection rate have changed the pattern, said Fahmida.
So, whatever the recovery process is, it would not be smooth. It would be mostly zigzag and uneven, said the economist.
Bigger challenge to boost investment
Investment is crucial to create employment for the people who lost jobs but it is not improving due to the ongoing pandemic.
Private sector credit growth stood at 7 per cent in May, while banks have huge idle money to invest.
On the other hand, in 2020, the net inflow of overseas investment in Bangladesh declined by 10.80 per cent to $2.56 billion, which was $2.87 billion in 2019.
However, foreign investment during the October-December period of 2020, the last quarter of the year, increased nearly 15 per cent to $828 million, which was $720 million during the same period of the preceding year.
In the July-May period of the last fiscal, net FDI inflows rose by 36 per cent to $1.62 billion, which was $1.19 billion in the previous FY.
“In the present investment climate, investors would not be interested to pour fund. In attracting investment from home and abroad, we have to improve the climate, where vaccination is the key tool to boost investors’ confidence,” Ahsan H Mansur told The Business Post.
SME sector in dire state
Cottage, Micro, Small and Medium Enterprises (CMSMEs) sector suffered the worst during the pandemic and is yet to recover.
According to a recent research of SME Foundation, 83 per cent entrepreneurs incurred financial losses while 37 per cent employees lost jobs and 70 per cent is at risk. Twenty-one per cent shut business and sales declined by 94 per cent.
“Recovery and resilience are seen in formal sector and big companies, which focuses on domestic market but the informal sector and CMSME are in trouble,” Dr Zahid Hussain, former lead economist of World Bank, Dhaka told The Business Post.
Small entrepreneurs and their employees are not doing well as income shrank and jobs lost. For smoother recovery, the government has to come up with fresh fund with effective tool to ensure access to finance, said Hussain.
As the sector contributes over 25 per cent to GDP and creates the second highestnumber of jobs after RMG, a sustained recovery would not be possible without paying proper attention to this sector, he added.
Manpower export
Remittance inflows continues to grow but the number of outbound expatriates is yet to peak.
According to BMET data, during first five months of the current year, 1,95,240 migrant workers went to foreign countries against 2,17,669 in 2020. In 2019, over 7 lakh migrant workers went abroad for jobs.
“Right now, the remittance inflows are healthy and showing continuous uptrend. Most of the expatriates, who returned home due to the pandemic are not returning to work due to difficulties relating to financing and vaccination,” CPD Executive Director Fahmida said.
So, to retain the growth of remittance inflows, the government has to ensure vaccine for the outbound migrant workers urgently and take necessary steps for their safe return by providing funds, she added.
When to recover fully
It is very difficult to predict when the economy will recover fully but a successful mass vaccination campaign could hasten the process.
“It is totally uncertain whether infection would spike or decrease.The government is working to rein the infection rate and bring more people under vaccination,” Commerce Minister Tipu Munshi told the Business Post.
If we can vaccinate 50 per cent to 60 per cent people by 2022, I hope Bangladesh’s economy will recover to pre-covid level by 2023, he said.
On the other hand, the RMG sector is showing signs of recovery and we are getting benefits from the US-China trade conflicts, the minister noted.
On top of that, global economies, especially US and Europe, are doing better with the completion of vaccination. “So, I am hopeful about it and the economy will be better than pre-covid level by 2023,” he said.
Zahid Hussain said predicting the recovery is very difficult, even we did not retain the recovery trend attained during January-February period of the year. The lockdown is not yielding any dividends for the country. “So, it is not clear when Bangladesh can recover to pre-covid-level,” said the economist.
There will be confidence about economic recovery if vaccination remains on track and manages to rein the infections and bring it to a tolerable level through strict lockdowns and health guidelines, he added.
