Concerns grow over exports as coronavirus hits global economy
A possible global economic slowdown because of the spread of coronavirus to a large number of countries, including Japan, Italy and the United States, has become a new headache for Bangladeshi exporters, who have already been affected because of problems in importing raw materials and capital machinery from virus-hit China.
The spread of the virus in new countries over the last few days is mounting up the fear of a global economic crisis and standstill among the economists, experts and traders globally.
Economists and exporters said that as the coronavirus was spreading to many more countries, it could bring a huge shock to the export earnings of Bangladesh if the virus became a global pandemic and was prolonged.
Spread of the virus to Bangladesh will be devastating for the export sector, they feared.
A possible global economic slowdown due to uncertainty in production, disruption in supply chain and reduction in demand in the global market may severely affect Bangladesh’s export and its overall economy, they said.
They, however, said that the possible impact was yet to be clear and the situation would become clear by March based on to what extent the spread of the virus could be contained or the level of spread.
The country’s exporters, economists and government entities have so far assessed the impact on export due to disruption in supply chain from China.
China, where the outbreak began in December last year, is the single largest supplier of industrial raw materials for readymade garment and other sectors of Bangladesh.
Now, the fear is being intensified as the number of affected people is increasing in the already affected countries and the virus is spreading to more countries in Europe and North America, the destinations of the biggest portion of Bangladesh’s export of apparel and other products.
The cases of coronavirus infection are increasing in Italy, the US, Germany, France, Japan, Spain, the Netherlands and some other countries.
The US is the major market for Bangladesh exports, especially the readymade garment products, with the total proceeds standing at $6.8 billion in the last financial year 2018-19 while Spain is the fourth largest market, Italy sixth and Japan seventh.
Export earnings from Spain stood at $2.2 billion in FY19, from Italy $1.64 billion and from Japan $1.3 billion.
According to the global media reports, the coronavirus outbreak began to look more like a worldwide economic crisis Friday as anxiety about the infection emptied shops and amusement parks, cancelled events, cut trade and travel and dragged already slumping financial markets even lower.
The wide-ranging efforts to halt the spread of the illness threatened jobs, paychecks and profits.
The list of countries touched by the illness climbed to nearly 60 as Mexico, Belarus, Lithuania, New Zealand, Nigeria, Azerbaijan, Iceland and the Netherlands reported their first cases.
Europe’s economy is teetering on the edge of recession. A measure of business sentiment in Germany fell sharply last week, suggesting that some companies could postpone investment and expansion plans, reports said.
Stock markets around the world are continued to plunge wiping out trillions of dollars.
Centre for Policy Dialogue distinguished fellow Mustafizur Rahman on Saturday told New Age that the World Bank and other international agencies revised downward the global economic growth projection for the current fiscal year.
‘It is clear that the global economy is heading towards a slowdown, though not recession, as trillions of dollar just wiped out from global stock markets on fear of further spread of the virus.’
It would affect global economies, particularly export-oriented countries like Bangladesh, if the COVID-19 virus further spreads and prolongs, he said.
But, the good news is that the spread of the virus has reduced in China, the origin of the virus outbreak, said Mustafizur.
Actual impact on Bangladesh export is yet to be assessed as it will depend on the developments surrounding the outbreak, he said.
He said that Bangladeshi exporters and the government should be alert, instead of being panicky, to face the crisis through diversifying the source of raw materials procurement and other measures.
But, the most important priority is to be remaining cautious so that the virus cannot be spread to the country, he added.
Policy Research Institute executive director Ahsan H Mansur said that it would affect Bangladesh’s export and the economy if the virus became a global pandemic.
But, the most devastating impact Bangladesh would face if the virus reaches Bangladesh as global buyers may be fearful to stay in the country, he said.
‘It is the biggest fear now if the virus spreads to the country,’ he said.
Globally all are in fear of pandemic and afraid of huge shock to trade and economy due to new suspects in new countries, he said.
Earlier, the Bangladesh Trade and Tariff Commission in its report said that the epidemic could put a huge negative impact on Bangladesh’s export and import.
According to the report, 13 sectors, including export-oriented RMG, leather and leather goods, apparel accessories, cosmetics, electrical goods, jute, medical equipment, electronics goods and plastic goods, might face the blow.
The leather sector alone may face a loss of Tk 3,000 crore due to the epidemic, it said.
Supply chain for the apparel sector will be severely disrupted as 60 per cent of woven fabrics and 15 per cent to 20 per cent of raw materials for knitwear come from China, it said.
According to the National Board of Revenue, imports from China declined by 21 per cent in the period between January and February 15 of the current fiscal year 2020 compared with that of the same period of the last FY19 due to a supply disruption following the epidemic.
Md Fazlul Hoque, former president of the Bangladesh Knitwear Manufacturers and Exporters Association, said that if the coronavirus soared in Europe and America like China, it would affect Bangladesh’s export severely.
Not only export from Bangladesh, the economic activities in all over the world would face a serious crisis, he said.
Fazlul hoped that the European countries including Italy would able to battle the coronavirus situation and economic activities would not be hampered.
Anwar-ul-Alam Chowdhury Parvez, former president of the Bangladesh Garment Manufacturers and Exporters Association, said, ‘We have nothing to say but pray to the Almighty for saving us from the epidemic as the crisis is not created by human beings.’
