Economy braces for new challenges in 2021

·        GDP growth still better than many countries

·        Export diversification vital for sustaining growthBangladesh has faced major economic challenges in 2020 amid the Covid-19 pandemic.

The pandemic has spread with alarming speed globally, infecting millions, and bringing economic activity to a near-standstill as countries imposed tight restrictions on movement to halt the spread of the virus. As the health and human toll grows, the economic damage is already evident and represents the largest economic shock the world has experienced in decades.

The World Bank in June in its forecast envisions a 5.2 per cent contraction in global GDP in 2020, despite the extraordinary efforts of governments.

Economist and former adviser to a caretaker government Dr ABM Mirza Azizul Islam shared his insights on the economic impact of the pandemic as well as the economic challenges the country might face in 2021 and beyond.

Dr ABM Mirza Azizul Islam said though Bangladesh has suffered during the pandemic, it has done better than many other countries.

“We have to remember that the economic performance of Bangladesh has been achieved remarkably over the past many years. So the pandemic has created concern on GDP growth which measures a summery growth of a country’s economy,” he added.He said among the 12 countries in Asia including Bangladesh, Cambodia, China, India, Indonesia, South Korea, Laos, Malaysia, Philippine, Pakistan, Singapore, Sri Lanka and Vietnam, Bangladesh has been the top performer in term of average GDP growth between 2016 and 2018.

Covid-19 had an impact on GDP growth as many factories went completely under lockdown due to pandemic. Many lost their jobs in the manufacturing sector.

As a result, Bangladesh’s GDP growth dropped to 3.8 per cent would be much better than many other countries in Asia even than the fast growing economy of Vietnam, Cambodia and even India.

“We are performing better though we could not fully utilize our potential due to Covid-19 pandemic. Behind the growth rate, there is a number of contributing factors. One of these factors is investments, in particular, private sector investment that has been driving growth in Bangladesh for many years and it has actually gone down in proportion of GDP in 2020,” said Dr A.B.M Mirza Azizul Islam.

“We have to improve our governance indicator. Bangladesh also scores low from the point of view in ease of doing business as per the report published by the World Bank. Then the World Economic Forum published a competitiveness index where Bangladesh scored low. And also Human Resource Development is not satisfactory,” he added.

All these issues need to be addressed — increasing private sector investment and thereby accelerating growth. “So that we can go back in our earlier performance of 7.0 per cent GDP growth and in fact in our 8th five-year plan aiming more than 8 per cent growth rate,” he added.

“Export unfortunately suffered due to Covid-19 pandemic. During the July- November period, the growth rate of export was less than 1.0 per cent. Bangladesh needs to increase export and that will not be very easy.”

Bangladesh has been to trying to diversify the export markets but as of now major exporting destination is focused in EU and USA markets. Bangladesh has been trying to bring diversification in export markets so that falling demand for export in the countries can be concentrated to rising of other growing market, Dr Mirza Azizul Islam said.

Bangladesh has to explore new export markets, no lingering with US markets only. Russian federation countries may become a new export destination. Besides, countries of East Europe, Central Asia countries have a potential export market for us. Expanding export markets in Canada and Japan we have already been trying, Dr Islam noted.

Another problem in the export sector is the dependency on the garment sector. As a single sector, the garment makes up more than 80 per cent of export earnings, so here, first of all, we need to ensure that we can export products other than garments. Bangladesh in fact does export many products other than the garments. But those are very small quantity. Inconsequence is very small and their total account less than 20 per cent. Though the number of export products is more than 1000, so we need more attention to the future growth of export markets, he said.

The private sector particularly in Bangladesh is almost entirely is financed by the banking system because the stock market is not skilled and in a good shape for gathering capital financing. Though in recent times has some improvement happened and some good companies like Walton and Robi enlisted, despite this the market would not pick up as desired. The Dhaka stock exchange general index stands at 5200 points which are around half 10,000 points of 2010. So in this scenario banks constitute remained the main source of investment finance in Bangladesh, the economist said.

Dr Mirza Azizul Islam also said the country will have to face a number of significant challenges in the year 2021. “But we may derive some consolations from the situation that our overall GDP growth performance is better than many other countries, especially the fast-growing neighbouring countries.”