Corona lays cool hand on economy -The Asian Age

 
Bangladesh detected its first confirmed coronavirus case on 8 March. As of this writing, the number of confirmed cases in Bangladesh is 2743, and the virus has claimed 42 lives.

The COVID-19 pandemic is causing an unprecedented disruption to the global economy. The resultant socio-economic impact is being transmitted through different channels.

The International Monetary Fund (IMF) warned that the pandemic might push the global economy into the worst recession since the Great Depression of the 1930s, and far worse than the one triggered by the Global Financial Crisis in 2008-09, with the poorest countries being the hardest hit.

The government should act promptly to allocate further resources to healthcare infrastructure development to tackle this pandemic. Till now, there is no vaccination for this virus. Thus isolation and lockdown are the only means to stop the spread of this deadly virus.

The unprecedented Covid-19 pandemic has caused disruptions to global trade, business, and education. 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.

Till now, the Bangladesh readymade garments (RMG) industry has received work order cancellations of nearly $3 billion.

Around 2 million workers in the industries will be affected by this. Around 4 million people are directly engaged with the RMG sector e.g. backward linkage industries, accessories and packaging factories and transportation sector.

The import and export-oriented companies are also at risk. The foreign remittance will come down and thus it will hit the foreign reserves of the country.

Bangladesh will fall into a really difficult situation if the country remains locked down for a longer period. Here, a huge number of people live from hand to mouth. Consistent high growth has been unable to create sufficient jobs in the economy. Due to inequality of income and asset distribution, the advantages of higher GDP growth is not evident in society.

Recently, garment workers coming back to Dhaka amid the government-imposed shutdown and the risk of getting infected only revealed that due to disparity in wealth distribution these people are unable to stay at homes without work for their survival, thus, they are concerned much more about their job rather than Covid-19.

The higher growth and increased per capita income have benefitted a small group of rich people much more than the much greater number of poor people. Now its 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.

We all know the banking industry is in back gear due to mounting non-performing loans (NPLs). If the RMG industry and its backward linkage industries fail, then the entire banking system will collapse. Today, fifty-nine commercial banks and general insurance companies are heavily relying on garments and related industries for their business.

The government has already declared a Tk5,000 crore incentive package to mitigate the losses in the RMG sector. However, if the outbreak prolongs it will be difficult for the government to handle the situation and the result of this will be catastrophic as more than 85 percent of the countrys export earnings come through the RMG sector.

We could not diversify our export basket, thus creating a huge risk in our export portfolios. If we look at our RMG rival Vietnams export portfolios, RMG has earned one-fifth of its total export earnings.

Their export basket is pooled with some other industries combination; thus they don't need to rely on only one industry. For sustainable economic growth, Bangladesh should have diversified its export basket o reduce the sole dependency on the RMG industry.  

Due to uncertainties over the invention of vaccination to prevent the fatal, it is fully unpredictable to make a to-do list as lockdown or isolation is not the ultimate solution.

On a larger scale, we may have to face an economic slowdown in the short term while there might be a recession in the long term.

On April 5, Prime Minister Sheikh Hasina unveiled a Tk72,750 crore stimulus package, including the previously declared Tk5,000 crore package, to address the economic impacts of the coronavirus outbreak.

The amount is nearly 2.52 percent of the countrys GDP. The government could take both fiscal and monetary measures to combat the novel coronavirus.

The monetary actions would be lowering the repo rate and reduction of the Cash Reserve Ratio (CRR) to increase the money supply to the economy.

The COVID-19 pandemic is likely to cause an increase in global poverty for the first time since the 1990s. According to a UNU-WIDER estimate, the number of people living in poverty could increase by 420-580 million. The World Bank estimates that the share of the population living in extreme poverty (incomesless than $1.90 per day) will rise by 40-60 million. The United Nations, however, put the number in the range of 84-132 million. According to the Save the Children and UNICEF, the COVID-19 pandemic could push an additional 86 million children into household poverty by the end of 2020.

The world could see the number of hungry people double in the aftermath of this crisis, as per the World Food Porgramme (WFP). As per the Global Report on Food Crises, there were 135 million people in acute food insecurity in low and middle-income countries last year. That figure could almost double to reach 265 million in 2020.

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