Economic ramifications of Covid-19 in Bangladesh
Bangladesh is being forced to endure lockdowns to tackle the Covid-19 pandemic. These lockdowns are having a crippling effect on workers and businesses across the country. The economy has almost come to a standstill and debilitating effects are being observed in almost all sectors.
Even the developed nations are facing medium-to-long-term recession and the oil-producing countries are enduring enormous economic pressure due to plummeting of oil prices. All these have led to huge setbacks for Bangladesh particularly in its remittance inflow, export earnings, industrial production and also services sector.
There are differing opinions on possible impacts of Covid-19 on the Bangladesh economy. Both the World Bank and the International Monetary Fund (IMF) have expressed apprehensions about the economic growth that may slide down to just over 2.0 per cent during the current fiscal year. Their prediction appears to be realistic given the decline in or negative growth in developed and developing nations. The government still remains optimistic about growth prospect. However, damages to the Bangladesh economy will depend largely on duration and pervasiveness of Covid-19, as well as effectiveness of government measures to tackle the calamity.
The poor, especially daily wage earners, are the worst sufferers. Economic stagnation is having a terrible effect on lives and livelihoods of those whose incomes hover near poverty level. Large segments of the population - the poor and low income people - are employed in the informal sector and do not have stable incomes. Therefore, the status of these powerless people needs to be considered foremost for gauging the impact of the pandemic.
Around 34 million people, or 20.5 per cent of the population, live below the poverty line, according to Bangladesh Bureau of Statistics (BBS) data. An analysis by Dhaka-based South Asian Network on Economic Modelling (SANEM) shows that this number would rise by 36 million if the income level for poverty line is raised by 1.25 per cent. These 36 million, not officially categorised as poor, can certainly be viewed as economically powerless. Many of them are likely to fall into poverty trap because of the pandemic.
Poverty rate in Bangladesh may rise to 40.9 per cent if Covid-19 causes 25 per cent fall in family incomes, according to the SANEM estimate based on the BBS's income and expenditure survey data. Consequently, the successes in alleviating poverty over the past two decades may fizzle out.
Negative impact on income may differ with nature of work or vocation. The SANEM model indicates that a large segment (43 per cent) of this vulnerable population is engaged in crop-production, livestock-rearing and fish-cultivation. Other notable segments are industrial workers, including those employed in garment factories (16 per cent), retail businesses (11 per cent), transportation (10 per cent), and construction sector (7.0 per cent). SANEM points out that though average poverty rate may rise to 40.9 per cent countrywide, this rate may be surpassed in 40 districts including Rangamati, Mymensingh, Sunamganj, Cox's Bazar, Nilphamari, Narail, Chattogram, Netrakona, Chuadanga, Sherpur, Barguna and Shariatpur.
The government has already announced financial incentives for countering the Covid-19 impacts and is also executing various social safety measures. Successes of these programmes will depend largely on three factors.
Firstly, the poor and helpless people need to be identified correctly and, typology and duration of assistance provided to them should be determined properly. Secondly, reaching this assistance to deserving people should be ensured in a timely manner. And thirdly, an appropriate supervision and evaluation process should be put in place to ensure transparency, accountability and effectiveness of the measures.
According to the BBS Labour Force Survey 2016-17, 85.1 per cent of Bangladesh's workforce are employed in the informal sector. The IMF has recommended some policy responses for informal workers as they account for about 60 per cent of non-farm employment in the Asia-Pacific region. These include: expanding the existing social assistance programmes; introducing new transfers; establishing public works programmes; and, preserving livelihoods through employment retention by extending support to small businesses.
Despite challenges, there are extraordinary opportunities for addressing longstanding inequalities in the areas of access to health and basic services, financial products and digital economy, as well as social security for the informal workers. The crisis has upended conventional norms on providing education and social assistance through internet, mobile and digital platforms by reaching broader segments of the population.
What is required now is a new deal that guarantees social protection against negative economic consequences of the pandemic, and that builds a stronger social safety net framework for the future.
The measures proposed by a recent IMF blog-post for this new deal have three broad dimensions. First: 'Getting the basics right', whereby developing countries should use the crisis to mount an effective public health response by shoring up public health infrastructure, expanding coverage, and plugging loopholes in the provision of clean water and sanitation. Secondly, more expansive and inclusive social safety nets should be put in place. And thirdly, there should be more investments in building digital capacity and bandwidth for expanding availability of digital platforms for education and financial services.
Dr. Helal Uddin Ahmed is a retired Additional Secretary and former Editor of Bangladesh Quarterly. [email protected]