The last global recession was in 2008, but it didn’t affect Bangladesh much at the time. And so when Awami League came to power in 2009, it didn’t have to grapple with any significant economic downturn, other than providing the readymade garment sector with a Tk 35 billion incentive package. This time the prime minister Sheikh Hasina has announced a Tk 50 billion fund for export-oriented industries, including the readymade garment (RMG) sector.
Financial sector experts, however, say it’s an entirely different situation this time. Coronavirus has sent the global economy reeling and this time Bangladesh will not be shielded. Bangladesh’s exports have been falling. Coronavirus will send exports plummeting further. Foreign buyers every day are cancelling orders. Imports are falling too.
International trade has come to a standstill as has the domestic market. Everything has been shut down except essential commodity outlets.
The finance minister has approached the International Monetary Fund (IMF) and the World Bank for USD1 billion as a bail out.
Dire recession ahead
World Trade Organisation (WTO) economists foresee a recession ahead, much worse than that of 2008. The organisation’s director general Roberto Azevedo made this clear in a video message delivered on 25 March from his home.
Roberto Azevedo said the coronavirus pandemic would have an enormous impact on the economy. He said the sharp downturn in trade would also see a large number of job losses. He urged all countries to work together to overcome the global crisis. He said if they failed to tackle the crisis, history would not forget or forgive them.
Roberto Azevedo said concrete forecasts were not yet available, but WTO’s in-house economists expected a very sharp decline in trade. He said it was positive that several governments had already taken steps to bring about changes in their financial and revenue sectors, but that more transparency would be needed in the sharing of information during the pandemic.
No one is totally self-sufficient in the present world order and so if one country faced a crisis, other countries would have to come forward to help. He spoke about coordinating efforts to increase collective recession-fighting power.
He said, “Trade is what allows for the efficient production and supply of basic goods and services, medical supplies and equipment, food and energy that we all need. Keeping trade open and investments flowing will be critical to keep shelves plentiful and prices affordable.”
Commenting on the message of the WTO chief, Policy Research Institute (PRI) executive director Ahsan H Mansur said that coronavirus has undoubtedly dealt a severe blow to the economy. It is hard to say how long the impact of this blow will last, but it was a matter of hope that the prime minister has announced a Tk 50 billion fund for the readymade garment sector. However, this fund needed to be bigger.
Ahsan Mansur said that the low income people were suffering with the closure of the informal trade sector. Plans had to be drawn up to deal with this situation for which the fund needed to be increased to Tk 200 billion to Tk 250 billion.
The Asian Development Bank (ADB) predicts that Bangladesh’s GDP would go down by 1.1 per cent. The 2019-20 GDP was estimated to be around Tk 28.86 trillion and the growth rate to be 8.2 per cent.
Speaking to Prothom Alo on the overall situation, president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) Sheikh Fazle Fahim said that so far the government has taken appropriate measures, including the Tk 50 billion fund. He said as the volume of damage hasn’t been assessed so far, specific demands could not be made as yet. However, they may ask for zero interest loans for all businesses, small and large, in the days to come.
Sheikh Fazle Rahim went on to say, “It is important now to see how far the damages could be contained through policy assistance. We will not make any unjustified demands. We are confident that the government will take all possible steps to lessen the negative impact of corona on all the affected sectors of the country.”
*This report, originally published in Prothom Alo print edition, has been rewritten in English by Ayesha Kabir.