Since March 2020, the whole world has been experiencing an altogether new phenomenon while struggling to combat the covid-19 pandemic. The fallout has immensely affected human lives and ways of living in an unprecedented manner. Measures such as isolation or lockdown to prevent the spread of corona are disrupting normal life around the world. The movement of people has to be limited. Export orders are being canceled, the tourism sector is being harmed and foreign trade is shrinking. As a result, the manufacturing sector, corporate and the stock market are in crisis.
The situation has turned into such a scenario that it has become inevitable to adapt to the epidemic than to think when people will be able to return to normal life from this struggle for livelihood and economic disaster. As a result, it is important to bring about comprehensive and inclusive changes in global economic planning.
Measures such as lockdowns have disrupted the global supply chain. Many countries have already experienced recessions due to disruptions to business activities, border closures, travel bans and other restrictions on movements. The decline in the work and income of a large number of people in poor countries, especially women, the young, the poor, and those in the informal and communications sector, is a major concern.
The severity of the disruption, both in terms of human suffering and economic losses, is so great that if prolonged, it could lead to a global economic downturn, such as the 2008 financial crisis. In this case, lack of proper political and economic wisdom will further deteriorate the crisis.
The struggle to earn a limited living will increase hunger, deprivation, and related sufferings in poor countries. In countries with relatively weak enforcement capabilities, the situation could be worse.
Not only the way of life, but also the way of doing business and institutional work has changed. Vending machines outside the Pinch Spice Market in Kentucky, USA, now produce small packets of a variety of medicinal spices and seasoning spices. It's not marketing; it's just a way to keep small businesses away from the epidemic, changing the types of many small businesses. On August 4, the number of daily corona infections in the United States exceeded one million. The country saw the highest number of victims in six months. In areas where vaccination is low, delta variant of the virus has been reported. Despite the record increase in infections due to the Delta variant, the United States wants to return to the Covid pre-economy by increasing economic activity in the opposite direction. According to a Reuters report, the total debt of consumers in the US has already reached $1.5 trillion by the end of June. The amount of this debt is the highest ever in the history of the country.
Against the contraction of growth, many countries have risen to increase their domestic consumption expenditure. Many governments are even giving money to their citizens to spend. However, developed and developing countries are less likely to heal wounds in the same way.
Bangladesh's ability to reduce poverty is at an appreciating level. This country of 160 million people is now going to be self-sufficient in food. In the five decades since independence, the country's economy has made significant progress with limited resources. The growth rate of gross domestic product (GDP) has been steadily increasing.
Not everyone has benefited equally from the country's impressive growth and development due to increasing income and wealth inequality. Another challenge is that economic activity is concentrated in the big cities, resulting in huge rural and urban divisions and increased urban poverty. In this situation, reaching the fruits of growth and development to the economically downtrodden people is now the biggest challenge for the country.
In this situation Bangladesh is dealing with Covid-19 epidemic. 98 per cent of SMEs in Bangladesh have lost their income due to Covid-19. 82 per cent of small and medium entrepreneurs in the country have suffered moderate losses in business, and the average consumer has declined by 8 per cent.
The actual magnitude of the economic impact will depend on the duration of the epidemic-- how it develops and what remedial action will be taken. Without it, lockdown is not an effective way to stop spreading the infection. The fact that the virus is out of control even after the lockdown proves that we are making a mistake somewhere.
Frequent lockdowns can affect revenue collected at the import stage in terms of declining imports and exports. Along with the potential disruption to the import of essential raw materials, public investment could also be adversely affected. At the same time, it will increase the pressure on Bangladesh's major exports. As a result, there will be pressure on the balance of payments (BOP) and disrupt the exchange rate stability.
In addition to affecting the components of international trade, the global economic downturn could have an adverse effect on the availability of foreign aid which could hurt public investment. Other countries may stop hiring workers from Bangladesh until an effective vaccine for corona is invented and its widespread use is confirmed. As a result, the remittance flow of our country may be severely affected which will cause volatility in the exchange rate.
Due to the Corona crisis, it is natural for private traders to find this period of investment very risky. As a result, disrupted economic activities, especially in the informal sector, will greatly affect employment prospects.
In the wake of the coronavirus outbreak, the pressure on public spending to ensure healthcare across the country will increase significantly, as will as the need for support for the victims. The pressure to raise additional resources to finance upward spending will increase amid the revenue collection at risk of decline.
The global economy lost its momentum last year in the wake of this deadly epidemic. But this time, economists think that all countries will turn around. According to the Reuters survey, global growth this year will be 5.9 per cent, the highest since 1980. The main effective approach behind this recovery will be rapid vaccination.
We should vaccinate all workers in the export oriented garment industry as early as possible and keep the garment factories open without lockdown, as well as start classes by bringing college and university students under the ticker. Our garment industry will be able to turn around with its production diversity and experience in the long run even if it faces temporary problems. Now morale is our main strength.
However, human movement will not be normal until vaccination is complete. Keeping that reality in mind, various changes have to be brought in the economic activities. However, the path to recovery may not be so simple. It all depends on the government policy in the country, whether they try to eradicate the epidemic or suppress it.
Although the global growth forecast is bright, the recovery of the labour market will not accelerate soon. It is predicted that the unemployment rate in any developed country will not return to pre-epidemic levels this year. The survey found that many people will remain unemployed for some time to come.
It is also unrealistic to keep everything closed for a long time for the sake of economy and livelihood. However, in order to deal with the corona situation, it is necessary to adopt long-term economic plans as well as appropriate and short-term measures for the economy.
Mohammad Abdul Jabbar is Managing Director, Aviva Finance Ltd. and an economics analyst. [email protected]