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Continuation of the current economic stagnation during the government-declared shutdown to prevent the spread of coronavirus will result in a grim economic outlook for Bangladesh, economists warn.
“There’ll be a big blow to the economy,” former caretaker government adviser and visiting Professor at BRAC University Dr AB Mirza Azizul Islam said.
He said international organisations have already projected low growth for Bangladesh at 2-3 percent, which was 8.15 percent in the previous year. Growth will depend on the continuation of the present situation. “If it continues then there will be a negative growth,” he said.
Dr Islam said when the situation improves the government’s main task would be restoring the supply chain, improving export activities through import of raw materials and capital machineries, noting that otherwise it would be tough to recover the export markets.
He said remittance inflow would drop due to coronavirus pandemic and to improve the situation, the government should give highest efforts to export manpower to the importing countries through diplomatic efforts.
He also said that there is weakness in the infrastructural structures in the country where the transportation and port management system has collapsed. These should be restored immediately.
Talking about the budgetary measurers after COVID-19, the economist said allocation for the social safety net has to be increased as a huge number of people lost their income and jobs.
He mentioned that a large number of people are engaged in informal economy and relief programmes have to be strengthened for them.
The government has many initiatives and attention should be given to ensure that these are administered properly, he said.
Distinguished fellow of Center for Policy Dialogue (CPD) Prof Dr Mustafizur Rahman said the country is facing a tri-dimensional calamity – health, economic and humanitarian – and attention needs to be paid to all three sectors.
He said allocation for health sector in the country is the lowest, only 0.9 percent.
“The average allocation in the worldwide is 3-4 percent. We didn’t invest properly in our health sector. We have to give priority to our health sector so that we can take the necessary steps for health security,” he said.
He said that the government should allocate appropriate fund for the health sector in the next budget. On the other hand, safety gadgets for doctors have to be distributed right now.
For the economy, the CPD distinguished fellow said the economy was going through a tough time. He said the government has taken some measurers and these should be bolstered so that the country could enter recovery mood very quickly.
“Otherwise, it’d be difficult to revive the economy. The government should widen the expansion of monetary policy along with investment,” he said.
On the humanitarian purpose, Dr Mustafizur said the safety net programmes should be widened and strengthened.
For ensuring food security, he emphasised on boro harvesting properly saying that this season is very crucial for country in terms of ensuring food security.
“So far the situation of food security is good, but it will depend on the boro crops. The government has announced its target to procure 17 lakh boro crops already and for that the government should prepare well,” he said.
He said that if the Tax-GDP ratio of the country, which is below 10 percent, was like Nepal (18 percent) or India (17 percent), then it would be easier for the government to provide money more easily.
He said the government should start the recovery process as soon as possible and take actions against tax evaders and loan defaulters alongside ensuring good governance.
“If we can do that, then we’ll be able to improve our capability against facing calamity like this one,” he said, adding that the government should mobilise foreign aid to face the aftermath of COVID-19.
Responding to a query, he said the impact of COVID-19 on the economy could be measured on its longevity.
“If we could start our activities in full swing in May, then we could tackle the situation although the growth would have been lower than the previous year,” he said.
But if the lockdown continues till June, then the projection of the international agencies like World Bank will be true.
Dhaka University Professor of Development Studies, Dr Rashed Al Mahmud Titumir said the economy had been weak even before coronavirus struck.
He said poverty reduction was slowing down, unemployment was high and export earnings were shrinking.
“There was a blow to the economy before COVID-19 struck Bangladesh. Now, the hit is much bigger as production is stopped. Considering the two blows, the magnitude will be very much high,” he said.
Titumir said the government has to formulate its plan for three years and make budgets for the next fiscals according to that. He suggested to look into the matter of creating a life cycle based social security system for people who are lagging behind, overhaul the health sector, provide stimulus not loan to agricultural sector, step into multiplier effect programmes, and increase mission oriented capital facility.
Regarding the funding, he said the so called five percent budget deficit will not work here, rather he suggested increasing it to 10 percent, saying that consumption spending has to be increased.
Dr Titumir put emphasis on maintaining foreign trade, not give any chance of currency fluctuation and negotiate bilateral partners for debt relief and long term loans at low interest rates.
South Asian Network on Economic Modeling (SANEM) Executive Director Dr Selim Raihan said that it is obvious that there will be a big blow to the economy as all economic activities are halted due to the lockdown.
“Export and remittance already faced serious setback and the coming days are not that much promising,” he said. “There will be a huge negative impact [on the economy].”
Dr Raihan put emphasis on recovery plan from the government.
“It should include the fiscal measures, monetary policy and social protection in a way to stimulate private investment.”
He mentioned that the Prime Minister already announced various stimulus packages where many of these matters were included.
“The success of these packages depends on financing, distribution and monitoring of the money. This should be reflected in next two or three budgets,” he said.
He also said the country needs a big uplift to tackle post crisis situation and it also needs expansion of social safety net coverage.
“Bringing private sector in the investment will be a big challenge with reestablishment of supply chain,” he said.
Dr Raihan said priority should be given to boosting trade and addressing the inclining poverty rate.
(DS)
