Covid Pandemic The Troubled Bangladesh Economy
The unprecedented Covid-19 pandemic has caused disruption to global trade, business and education sector. Bangladesh is equally affected by this contagion. The economic consequences of the Covid-19 outbreak are tough to handle as the entire of the global supply chain has been interrupted due to worldwide transportation shutdown. Bangladesh readymade garments (RMG) industry has received work order cancellation of huge amount which is unbearable loss for the sector. Around 2 million workers in the industry will be affected by this cancellation. Around 4 million people are directly engaged with the RMG sector.
The banking sector is fallen in a trouble due to Covid-19 pandemic. Meanwhile, the banking industry is already in a burden due to mounting non-performing loans (NPL). Though, the NPL amount is decreased by take 18,200 million in march quarter and stands taka 9,25,100 million which is still alarming for the sector. Actually, the NPL amount decreased in papers only with the help of the circular given by Bangladesh Bank. In that circular it is instructed not to mark any loan as classified in this pandemic period if the loan amount is repaid or not. If the RMG industry and its backward linkage industry fall in business trouble, then the entire banking sector will be more vulnerable. Today fifty nine commercial banks and general insurance company are heavily relying on RMG and related industries for their business. Consequently, the NPL amount will be raised rapidly if the business of different sectors falls on a row.
Bangladesh already spill into a difficult situation for the locked down circumstance for a longer period, i.e. more than 2 months. In this country, a huge number of people live from hand to mouth. Consistent high growth has been unable to create sufficient job in the economy. Due to inequality of income and asset distribution, the advantage of higher GDP growth is not evident in society. The higher growth and increased per capita income have benefitted a small group of rich people much more than greater number of poor people. Now, it's the time for the government to think about this crucial issue and chalk out a long term plan to minimize the disparity between the rich and the poor.
The poor, especially the daily wage earners are the worst sufferer of this pandemic. Economic stagnation is having a terrible effect on lives and livelihoods of those people whose incomes hover near poverty level. The poor and low income individual, identically the large segments of our country's population is employed in the informal sector and they also do not have stable income. According to the survey, 85.10 percent of Bangladesh's workforces are employed in the informal sectors. They are the worst victims in this worldwide pandemic. Therefore, the earning status of these powerless people needs to be considered foremost for gauging the impact of the pandemic.
According to the Bangladesh Bureau of Statistics (BBS), around 34 million people live below the poverty line in Bangladesh which is 20.50 percent of total population. An analysis by Dhaka based South Asian Network on Economic Modeling (SANEM) shows that this number would raise by 36 million if the income level for poverty line is raised by 1.25 percent. These 36 million is not officially categorized as poor and they are treated as economically powerless. Most of them would be fallen into poverty trap because of this ongoing pandemic.
If this economic depression continuous, the new suffering group will be the middle income and lower middle income community. A lot of unemployed people also hail from these families. The government and social groups are helping the poor ones but these groups cannot seek help from others and keep suffering secretly in own boundary. Additionally, a lot of lower income people like, maid servants, drivers, security guards etc. depend on these groups. So, the government must especially focus on the middle and lower middle income groups to outcast the greatest adversity of this economic fallout.
SMEs are the bloodline of Bangladesh economy creating employment for 7.80 million people directly and providing a livelihood for 31.20 million in total. The Covid-19 pandemic has affected all spheres of life and business. It is the hardest hit towards the SME sector after the independence of the country since the sector depends on a short cash cycle, supply chain and regular sales. In this situation supply chain disruption, loss or stop of sales and incomplete cash cycle outcast the sector as most risky one of the economy.
Bangladesh is heavily dependent on the Chinese market for raw material, capital goods imports varieties of products and substantial exports. Traders in Bangladesh are already feeling the pinch as longer than expected shutdowns of Chinese factories because of the covid-19 outbreak are having a big impact on the world's second largest economy and the global supply chain. It is not known to us whether the situation would be normal or not.
The government should act promptly to allocate further resources to every vulnerable sector of the economy which are affected by Covid-19 to tackle this worldwide pandemic. Close supervision is also essential in distributing the different stimulus packages of various sectors which is already declared by the Prime Minister to build a stronger social safety net framework for the future progress of the economy. If it is done properly, the Bangladesh economy will about turn to its own position within the shortest period of time. We hope for a better, safe and economically strong Bangladesh where there is no clutch of coronavirus, corruption and any types of evil.
(Mir Mahmudul Haque Chowdhury is a banker. E-mail: email@example.com).