Bangladesh's economy might face difficulties to meet the GDP growth target for the fiscal year 2020-21 due to the current scenario of Covid-19, while the government has set the figure at 8.2 percent for this fiscal year, said the International Chamber of Commerce (ICC) Bangladesh on Thursday.
The country's economy grew by 5.24 percent in FY20 despite the Covid-19 pandemic against the 2 percent growth forecast by the World Bank and the International Monetary Fund (IMF).
The Covid-19 is an unprecedented health and economic crisis, affecting the lives and livelihoods of workers, as well as the continued operations of businesses globally. By its nature, the disease knows no national borders, said ICC Bangladesh in a press release.
The governments around the world are putting in place measures to address the unprecedented health, social and economic impacts of Covid-19.
To control the spread of the pandemic, Bangladesh government also enforced the 68-day countrywide shutdown from March 26, bringing the whole economy virtually to a standstill.
The shutdown has left a large number of people unemployed as they are dependent on daily income for their livelihoods. According to the Bangladesh Institute of Development Studies (BIDS) survey, Bangladesh will have 16.4 million new poor in 2020, owing to the pandemic impact.
Like most other emerging economies, to achieve the desired GDP growth, Bangladesh has to tackle several key issues including healthcare, sustainable export, Foreign Direct Investment and remittance flow.
Besides, in order to maintain sustainable growth and order to keep the supply chains functional and cost-effective, it is imperative to save MSMEs (micro, small and medium enterprises).
Therefore, timely implementation and ensuring that the various stimulus packages announced by the Government and the Bangladesh Bank are availed by the most desired will be very crucial, said ICC Bangladesh.
The Economist Intelligence Unit forecast on March 26 that the global economy is expected to contract by 2.2 percent in 2020. This is likely to affect its garment exports to major G-20 countries such as Germany, Italy, the United Kingdom and the United States.
Due to depressed oil prices, the Middle East and North Africa region will also face lower growth. For these reasons, Bangladesh's remittance inflow, export earnings, industrial production and services sector are going to be severely affected.
However, surprisingly remittance inflow recorded an all-time high of $18.2 billion in FY20 and on the other hand, export earnings have registered a sharp decline of nearly 17 percent at $33.67 billion in FY20 due to cancellation and reduced export orders of garments, which accounts for 84 percent of total national exports.
Experts consider that country's export diversification is urgently needed. At the same time, FDI dropped by 14 percent to $3.73 billion in the 11 months of FY20.
Prime Minister Sheikh Hasina has announced a number of stimulus packages to the tune of Tk677.5 billion (approx. $8 billion) planned to implement in immediate, short and long phrases.
The prime minister also announced a number of social safety packages, including direct cash assistance for informal sector workers; health insurance for health workers and bankers in case of Covid-19 infections, special honorarium for bankers, health workers and others and cash payment in case of death.
The Bangladesh Bank announced a moratorium on loan payments until September 30, 2020 and that such borrowers will not be in default.
The government announced details of its Tk50 billion – equivalent to approximately $595 million – stimulus package for export-oriented industries. This includes assistance towards salaries and funding of 2-year loans to factory owners at 2 percent interest.