Bangladesh felt the heat of a looming global crisis though the virus had not yet made its way into the country.
The bad news came a couple of months later. On March 8, the authorities confirmed the maiden case of Covid infection in the country. A week later, the first death from the virus was reported.
Soon, the country’s economy, one of the shining stars in Asia, came almost to a halt as the government imposed countrywide lockdown to contain the spread of the virus.
The main index of the stock market dropped by 15 percent in less than 10 days in the second half of March.
During the nationwide lockdown, millions lost jobs, poverty rate doubled and many businesses folded up. Income of the vast majority of the population shrank.
Exports hit rock bottom as the importing countries themselves were finding it difficult to keep their economies afloat. The country was staring at an unprecedented three-pronged crisis: health, economic and food.
To protect the people and the economy, the government rolled out a massive Tk 120,000-crore stimulus package, one of the largest in the world. It capped bank interest rates below single digit to help firms and businesses borrow at a record low rate.
Multilateral banks and bilateral partners poured billions of dollars to cushion Bangladesh.
But the biggest support came from farmers who continue to feed the country and the migrant workers who proved the grim forecasts wrong, sending home a record amount of remittance.
The robust flow of remittance lifted the country’s foreign exchange reserves to record highs and put the country on a firm footing.
The reopening of the economy in June was a very bold move and proved to be a judicious one, as the virus did not go out of control.
The food production, remittance, the stimulus package, the reopening, and the uptick in domestic demand and exports put the country on the path of recovery.
“Despite the Covid-19 pandemic, Bangladesh was able to escape a contraction in 2020,” UK-based Centre for Economics and Business Research said early this week.
Bangladesh’s GDP growth is forecast to drop to 3.8 percent in 2020, compared to 8.2 percent in the previous year. The government debt as a percentage of the GDP rose to 39.6 percent in 2020, considered low as per the international standards.
The government had a fiscal deficit of 6.8 percent in 2020, which allowed it to spend a huge amount of money to cushion the economy.
“This will have bolstered the economy in the past months,” the think-tank said.
It also mentioned, “While the harm to public health inflicted by the pandemic has been relatively limited, the effect of the outbreak on global demand and international supply chains means that the economic damage has been considerable.”
Despite the pandemic, Bangladesh is set to post the third-highest growth in the world and the highest in Asia in 2020, according to the International Monetary Fund.
In terms of growth, only Guyana and South Sudan are ahead of Bangladesh. India’s GDP would contract by 10.3 percent and Pakistan’s by 0.4 percent.
Of the 190 IMF member countries, only 23 are forecast to post a positive growth in the outgoing year.
Finance Minister AHM Mustafa Kamal said the prime minister had taken effective measures that fuelled domestic demand and helped people survive the crisis.
As a result, Bangladesh has been able to keep up the growth trajectory during the crisis, he noted.
“Other than Bangladesh, you will not find any country in Asia that has been able to maintain progress in every area of the macro-economy,” he told The Daily Star.
Zaid Bakht, a former research director of the Bangladesh Institute of Development Studies (BIDS), said the impact of the pandemic has not been as adverse as it was thought initially.
“The economy has weathered the impacts of the pandemic and is now on track for a recovery.”
People are trying to get back on their feet again and ride out the financial hardship due to job losses. “They are trying to do something to make a living,” he noted.
Mustafizur Rahman, a distinguished fellow of the Centre for Policy Dialogue, pointed out that Bangladesh’s major indicators such as export, import, balance of payment, credit growth, private sector investment and foreign direct investment were in a fragile state even before the pandemic.
“This is largely because Bangladesh’s major trading destinations had already been facing the impacts of coronavirus from January.”
In Bangladesh, poverty rose to 30 percent and unemployment to 40 percent, Mustafizur mentioned.
The government’s massive stimulus package helped the economy, but it is yet to recover fully, he noted.
“Most of the countries are likely to have negative growth this year.”
According to Mustafizur, the country’s reliance on the hardest-hit sectors such as export and tourism is relatively low compared to other countries. Domestic demand is the major driving force behind the economy.
Everyone had warned about disasters in health, economy and food sectors. “We needed to worry about health and economy. We did very well in the food sector. It is an area of strength of Bangladesh.”
Revenue collection would go up if there were robust economic activities. But it remains low, meaning trade and commerce have not returned to the pre-pandemic level, Mustafizur observed.
The country’s export is far away from the pre-Covid level, and the import of capital machinery is still negative.
The regulatory challenges have to be sorted out, and the planned economic zones have to be ready, he added.
Zahid Hussain, former lead economist at the World Bank’s Dhaka office, said the good news is that 2020 is now in the rear-view mirror.
“The bad news is we can’t be sure whether the unprecedented distress suffered globally in the year gone by is also a thing of the past.”
The economy is recovering, but it is not yet back on track to a faster and sustainable growth with investments still depressed and external demand wavering, he pointed out.
“I hope 2021 will get us back to a sustainable growth track as the world economy and domestic demand turn around.”
Making some suggestions for the days ahead, Monzur Hossain, research director at Bangladesh Institute of Development Studies, said that moving forward, the government should put more focus on creating jobs and bringing more poor people under social safety nets.
“There should be a more proactive and innovative role in extending stimulus packages to SMEs [small and medium enterprises].”
Many vulnerable groups have become even more vulnerable. The government should support them, he noted.
The finance minister is confident that Bangladesh’s agriculture, manufacturing and service sectors will achieve more in the next six months than what they did in the last six months.
“Bangladesh will not come under major stress due to the second wave of coronavirus like it did in the first wave.”
Asked about further stimulus package, he said, “The prime minister is very flexible about it. She will do whatever necessary.”
“We have adopted an expansionary policy and we are pursuing it to achieve our objectives. I don’t think that we will get stuck anywhere.”
Referring to the second wave of virus infections, Zaid Bakht said some risk factors surfaced again because of it. “We have to wait to see how the second wave plays out.”
The government should keep supporting the economy like it has been doing since the pandemic hit the country in March, he suggested.
“We have to roll out vaccines to boost the morale of the people. A mass immunisation programme will help the economy rebound quickly,” added Bakht.
Echoing his opinion, Zahid Hussain said, “Getting a critical mass of the population vaccinated in 2021 will be the key to taming the virus locally.
Optimism is in the air with the arrival of Pfizer, Moderna and AstraZeneca vaccines that promise a high degree of efficacy in debilitating the virus.
“Rejuvenating structural reforms, ensuring policy support to efficient enterprises faced with existential threat due to the pandemic, and strengthening the social protection system will be key to accelerating recovery while leaving no one behind,” he noted.