The government’s target to achieve 8.2 per cent GDP growth in fiscal 2020-21 is seemingly a difficult goal given the ongoing coronavirus crisis, International Chamber of Commerce (ICC)-Bangladesh said yesterday.
Despite the Covid-19 pandemic, Bangladesh’s economy grew by 5.24 per cent in fiscal 2019-20 instead of 2 per cent as forecasted by the World Bank and IMF.
The coronavirus is an unprecedented threat to health and the economy as it has had a severe impact on peoples’ livelihoods as well as businesses operations worldwide.
Currently, governments around the globe are enforcing measures to curb the spread of the deadly disease and its subsequent social and economic impacts.
The G20, alongside the WHO, IMF, World Bank, United Nations and other international organisations, have mobilised to take active steps to overcome the pandemic while the ICC is collaborating as a trusted business advisor with many of these engaged stakeholders, according to ICC-B’s quarterly news bulletin (April-June) published yesterday.
The ICC-B has written to G20 trade ministers with a roadmap for G20 countries to use trade policies in their fight against Covid-19 and rebuild the future.
Countries around the world are implementing economic and fiscal policy stimuli, including emergency tax measures, to support their economies under the pandemic.
To control the spread of Covid-19, the government announced a nationwide lockdown from 26 March onwards, forcing the whole economy to a virtual standstill.
A large number of people who depend on their daily earnings were left unemployed by the pandemic and according to a Bangladesh Institute of Development Studies survey, there will be 16.4 million new poor people in the country by the end of 2020 due to the coronavirus fallout.
The Economist Intelligence Unit released a forecast on 26 March that the global economy would contract by 2.2 per cent in 2020.
This is likely to affect Bangladesh’s garment exports to major G20 countries such as Germany, Italy, the UK and the US.
Due to depressed oil prices, the Middle Eastern and North African regions will also face lower growth rates. For these reasons, Bangladesh’s remittance inflow, export earnings, industrial production and services sector are going to be seriously affected.
However, remittance inflow was surprisingly recorded at an all-time high of $ 18.2 billion in FY 2019-20 while on the other hand, export earnings registered a sharp decline of nearly 17 per cent or $33.67 billion during the same period due to the cancellation and/or reduced export orders for garments, which account for 84 per cent of the country’s total exports.
Experts consider that export diversification is urgently needed for Bangladesh. Making matters worse, foreign direct investment dropped by 14 per cent to $3.73 billion in fiscal 2019-20.
Prime Minister Sheikh Hasina previously announced stimulus packages of Tk 677.5 billion that were implemented in immediate, short and long phases through four programmes (increasing public expenditure, formulating a stimulus package, widening social safety net coverage and increasing monetary supply).
The prime minister also announced a number of social safety packages, including direct cash assistance for informal sector workers; health insurance for health workers and bankers in case of Covid-19 infection, special honorarium for bankers, health workers and others and cash payment in case of death.
Bangladesh Bank announced moratorium on loan payments until 30 September this year and as such, borrowers will not become defaulters in that time. The government also declared the details of its Tk 50 billion stimulus package for export-oriented industries.
This includes assistance towards salaries and funding of 2-year loans to factory owners with 2 per cent interest.
Like most other emerging economies, Bangladesh has to tackle a number of key issues in order to achieve the desired GDP growth.
This includes the healthcare system, sustainable export, FDI and remittance flow.
Besides, in order to maintain sustainable growth and keep supply chains functional and cost effective, it is very important to save the micro, small and medium enterprises, the ICC-B said.