Reducing social distancing effects on the Bangladesh economy

In the last couple of months, unparalleled to any past events, economic and social impacts of the Covid-19 outbreak have become the main topic of global discussion. The pandemic, originated in Wuhan, China, has spread all over the world in three months. Until now, globally more than  165,000 people died, and almost 2.5 million people are tested positive.

Testing kits are not widely available in many parts of the world including Bangladesh. So, these numbers might be just underestimations. The contagious nature of the disease demands us to keep 'physical distance' to reduce the speed of the spread. While scientists are working to find a vaccine, stay-at-home is the key prescription to reduce the spread.

However, having an informal economy as big as almost 80 per cent of the total employment, the stay-at-home policy has multiple socioeconomic consequences. Hence, the nation needs to prepare for reducing the adverse effects of this policy, both for short and long run.

Prime Minister Sheikh Hasina announced a set of financial stimulus packages worth nearly Tk 1.0 trillion in all for paying salaries and allowances of workers and employees of export-oriented industries and to support industries including small and medium businesses and farmers and vulnerable groups. The packages include support through increasing public expenditure, widening social safety net, and money supply increase. While this initiative by the government is very welcome, there are substantial concerns regarding the stimulus package. The proposed packages mention support for small and medium businesses, the private sector, and the export-oriented services.

However, the programmes under the stimulus plan, which are supposed to be implemented in immediate, short, and long phases, do not mention the path to secure the basic daily needs for all individuals in the nation. The stimulus packages should include financial support for that portion of the population who are living below the poverty line, have become unemployed or have lost their income source as a result of the current lockdown and subsequent lack of economic activities.

A significant difference between the developed world and Bangladesh is the fraction of people working in the informal sector. Since Bangladesh does not have welfare policies like unemployment benefits or universal healthcare policies, the country needs to think of and design new welfare packages. Needless to mention that many institutions inside formal employment sectors lack capacity to cope with effects of lockdown for a prolonged period. On one hand, we need to pay for the excess burden coming from health costs and infrastructure to test Corvid-19 victims. On the other hand, we need to support people for the economic losses that they will bear due to the stay-at-home order.

Economic stimulus programmes have been historically being used during recessions and have worked efficiently for many economies, such as the United States, Germany, China, and Japan. In recent months, bailout and stimulus benefit packages are provided by the governments as a policy response to tackle the Covid-19 situation in the affected economies. In this line, the policies suggested below can reduce heterogeneous effects of Covid-19 preventive measures, like stay-at-home, on different groups with pre-existing economic and social conditions.

The economy lacks data and technological infrastructure to design targeted policies. Latest available disaggregated data on occupation and employment of Bangladesh comes from population census 2011 and reveals the district and sub-district level differences. The scenario may have changed in recent years, but the growth rate has stayed the same. Still, we need to collect data on migration, slum population, and people working at different supply chains of the big industries to target vulnerable population groups. The spatial variation in occupation and employment could be used to generate an index of the need to supply basic daily necessary products to those regions.

Short and long-term suggestions to design economic policies under 'stay-at-home' could be multifold. First, the government needs to find the most vulnerable groups of people/occupation based on the ground data from the Population Census (2011) based on their occupation, employment, and demographics. If the groups in informal sectors who are highly dependable on face-to-face interactions can be determined, then the administration can support them by lump-sum targeted cash transfer depending on their initial conditions. This may not involve any new data collection given that we already have understanding of employment allocation from the last census.

Second, basic food and medicine need to be subsidised to support needy families. Administrative support is also required to ban every type of stocking. Stocking will only worsen the situation. Third, some districts in Bangladesh extensively depend on expatriates. A fraction of these expatriate people has returned and is returning and they have lost their jobs due to the pandemic effect in the destination countries.

The administration not only needs to keep them under isolation to test for Covid-19, but also to support them financially where required. The country needs to prepare for a fall in remittances as well.

The effects of Covid-19 will last for years, as it has been globally predicted already. Some long-term suggestions could be to use existing infrastructure supported by NGOs (non-governmental organisations) to provide cash transfer to people as microcredit loans, creating employment in diverse sectors, such as delivery or construction workers, health associates, and caregivers. Some industries like the readymade garments sector may suffer most, due to the low demand from buyer countries. The government needs to collect employment data from these sectors to see how we should respond to the crisis in the short and long run.

There are lots of other socioeconomic problems that may arise in this line with Covid-19. For example, additional stay-at-home by the households can put women at higher risk, through extra unpaid domestic labour or higher exposure to domestic violence. Finally, Bangladesh's education system may suffer as the country does not have well-planned decent online education infrastructure. These are important questions to think about, along with a big issue of surviving under stay-at-home. As a country so dependent on social networks, can we survive Covid-19 with social distancing? Let us be optimistic. With careful design of government policies, targeted financial support, and implementation, we will survive.

Dr. Aparna Howlader is a Post-Doctoral research economist at the Eviction Lab at Princeton University and specialises in economic history, environmental and natural resources, and urban economics.

[email protected]

Dr. Naima Farah is a Post-Doctoral research economist at Texas A&M University's AgriLife Research Center and specialises in energy, environmental and natural resource economics and development economics. She is expected to join US Department of Energy- Federal Energy Regulatory Commission as an Energy Economist in June.

[email protected]

Opinions expressed here belong to the authors only.