Economy upended by pandemic

The partial lockdown enforced throughout Bangladesh since April in the wake of a second wave of Covid-19 pandemic is undoubtedly having a choking effect on the country's economy. Those who work in the services and manufacturing sectors appear to be taking most of the brunt. Three survey reports released recently during the month of Ramadan also point to a dismal picture on the economic front. The first report jointly prepared by the Power and Participation Research Centre (PPRC) and BRAC Institute of Governance and Development (BIGD) found that a huge number of people who slipped below the poverty line at the start of the pandemic's first wave could not return to their erstwhile status. And the number of people labelled as the 'new poor' was as high as 24.50 million in March this year.  A South Asian Network on Economic Modelling (SANEM) survey earlier showed in January that the country's poverty rate had jumped to 42 per cent from the previously claimed 21per cent.

The economic status of a large segment of the country's population living slightly above the poverty-line prior to pandemic was very fragile. Consequently, they dipped below the line due to the adverse impact of general holiday cum shutdown of factories and businesses during April-May last year. According to PPRC-BIGD survey, about 21 per cent of Bangladesh's population became the 'new poor' as a result. But a segment among them could bounce above the line after the restart of businesses from June. Consequently, the proportion of 'new poor' in March 2021 declined to 15 per cent from the previous 21 per cent. But the situation may worsen further during this second wave, as initiatives for extending assistance to the vulnerable population have diminished compared to the earlier instance. 

The report also showed that the 'new poor' in urban centres outnumbered those in villages. About 17 per cent of the people became unemployed after February 2020, but 8 per cent among them could not yet return to work. Domestic workers, service-holders and skilled labourers accounted for a majority among the latter group. Besides, 41 per cent had to change their employment. Another notable finding was that about 27 per cent of the slum-dwellers left the towns last year, but 10 per cent among them have not returned. Shockingly, the slum-dwellers who could stay on in towns have stopped consuming nutritious food like meat, milk or fruits, and now spend 17 per cent less on food consumption.

Another joint survey report released by SANEM and Asia Foundation on 2 May revealed that only 22per cent of the targeted business firms could actually avail the stimulus package incentives offered by the government in the wake of Covid-19 pandemic. Overall, 69per cent of the firms did not get any incentive, and 9per cent did not even know about these. The survey showed that the rate of getting incentives was higher among powerful groups and those having stronger voices. A majority of stimulus recipients were from the manufacturing sector (82.7 per cent). Amongst the industrial segments, 58 per cent of the RMG firms received the package, while the rate was 40 per cent for textiles, and 30 per cent for the leather industry. Besides, 46 per cent of the surveyed large firms received the package, in contrast to 30 per cent for medium-sized firms and 9 per cent for small ones. A similar trend was observed in the field of recovery. Whereas 77 per cent of the large firms could recover, the proportions were 64 per cent and 47 per cent respectively in case of medium and small ones.                   

The third survey was conducted jointly by the Centre for Policy Dialogue (CPD) and OXFAM, and released on 5 May. Titled 'Income and Employment Situation in Covid Times: How the People are coping', it showed that over 60 per cent of the employed population lost their jobs at some point; 85 per cent workers were left unemployed for at least one month; and the incomes of 45 per cent households have dwindled during the pandemic. A large segment did not get back their jobs, many of whom had to switch to the agriculture sector for a living. And significantly, at least 90 per cent among them got involved in family-help tasks, self-employment, and daily wage-based labour. Over 40 per cent of the employed population reported that their employment situation was worse than the pre-Covid-19 period, and 86 per cent workers divulged they were not earning enough to purchase daily necessities. Around 78 per cent households had to reduce expenditure, with 53 per cent curtailing food expenditure and about half the households experiencing a decline in savings. However, only 20 per cent households received some form of government support, with a higher proportion getting support from private sources. Overall, inequality in the country has worsened.

As pointed out by SANEM, the survey findings indicate several policy options for the government. Firstly, a sector-based approach should be adopted to assess the needs and identify the needed policy measures for aiding the worst-affected sectors like leather and tannery, light engineering, transport & communication, retail trade, food processing, hotels and restaurants, etc. Additional incentive packages like loans at lower interest rate for longer period, enhanced and simplified duty drawback facility, increased export cash-back facility, and expansion of the coverage of export development fund should be urgently considered for these sectors. An assessment of the stimulus package implemented so far should be carried out immediately, as its effective implementation is critically important for any future recovery. Besides, the government should constantly strive to improve the overall business climate, as better business environment helps firms improve their performance even during pandemics.

The policy responses prescribed by CPD include immediate enhancement of cash transfers to the marginalised and affected households. Over the short term, the stimulus packages should be redesigned in view of lower accesses experienced earlier. The private sector will have to play a stronger role in the medium term alongside infrastructure investments by the government, strengthening of labour market institutions, and a boost in private investments through reforms in doing business.

Dr Helal Uddin Ahmed is a retired Additional Secretary and former Editor of Bangladesh Quarterly. [email protected].