ADB now forecasts economic losses of $13.3 billion

Where does this end? The Bangladesh economy now stands to lose a staggering $13.3 billion for the coronavirus outbreak, according to the Asian Development Bank, which is more than four times the amount of damage the Manila-based multilateral lender had predicted back in March.

The estimated damage is now 4.9 per cent of the country's gross domestic product, up from 1.1 per cent as previously thought.

This means the announced stimulus packages, which are equivalent to 3.3 per cent of the GDP, would fall short in countering the destruction caused by the highly contagious, lethal virus originating from China.

Some 1.4 million to 3.7 million jobs would be lost for the economic fallout for the countrywide general shutdown enforced since March 26 to flatten the curve on the novel virus, according to the ADB.

The pandemic will affect the economy through three main channels: a slowdown in domestic economies, sharp decline in exports and reduction in remittances, the ADB said in a project document sent to the Economic Relations Division (ERD) of Bangladesh recently.

Subsequently, the Bangladesh government will seek $500 million in budget support from the ADB board on May 7 to soften some of the blows from the catastrophe, said an ERD official.

With 20.5 per cent of the population under the poverty line, and 10.5 per cent living in extreme poverty, Bangladesh is especially vulnerable to economic shocks such as the one thrown up by the global coronavirus pandemic.

Any economic shock would push a significant proportion of the near-poor under the poverty line and deepen the poverty of those already poor, reversing previous gains made in poverty reduction, the ADB document said.

Of the total workforce, 85 per cent operate in the informal economy, leading a hand-to-mouth existence, and social distancing and quarantine measures mean their livelihoods are effectively vanquished.

The official unemployment rate is 4.3 per cent in Bangladesh. However, many employed in the garment sector and micro, small, and medium enterprises may already have lost their jobs, and the economic downturn will further dampen the employment market.

The poor are especially vulnerable to infectious diseases such as COVID-19, due to overcrowding, unsanitary conditions, and poor access to health services.

As initial support, the ADB has provided $350,000 technical assistance grant to address the outbreak of coronavirus disease and potential outbreaks of other communicable diseases.

Complementing these health sector interventions is a $500 million loan, comprising $250 million from ordinary capital resources lending and $250 million concessional loans for countercyclical support to address downstream effects of increased spending on social protection, salary support to workers, low-interest loans to affected sectors, and increased monetary supply.

A technical assistance grant of $1 million to support strengthening the social safety net and institutional capacity has also been provided.

Bangladesh has undertaken a $113 million project to fight COVID-19 and improve preparedness, and as part of the project, the ADB on Thursday approved a $100 million loan.

The project will help meet the government's immediate and medium-term needs to prevent the spread of coronavirus, by supporting emergency procurement and the provision of the most crucial medical equipment and supplies, the ERD official said.

The loan will carry 1 per cent interest rate per annum, with a term of 40 years, including a grace period of 10 years, repayment of principal at 2 per cent per annum for the first 10 years after the grace period and 4 per cent per annum thereafter.

High population density, rapid urbanisation, a large population of migrant workers, and more than 20 per cent of its urban population living in slums without adequate sanitation, make Bangladesh vulnerable to infectious disease outbreaks.

But Bangladesh has limited capacity to prevent, detect, and respond to public health emergencies.