Govt battling an unknown quantity

Bangladesh has thus far announced a $8.56 billion stimulus package that is nearly three times the initial projected economic losses from the coronavirus pandemic.

Earlier in March, the Asian Development Bank forecasted that Bangladesh's gross domestic product may contract by as much as 1.1 per cent in the hypothetical worst-case scenario of a significant outbreak of coronavirus in the country.

That means, $3.02 billion of the $300 billion-plus economy could be wiped off.

Then on April 3, ADB said its preliminary estimates indicate that about 0.2 per cent to 0.4 per cent of Bangladesh's GDP may be lost due to the global pandemic.

From that perspective, the government's priming the pump seems adequate.

"But under the present circumstances, it is assumed that the extent of loss could be much more," said Prime Minister Sheikh Hasina said on Sunday while unveiling a second stimulus package worth Tk 67,750 crore for all businesses, industries and economic sectors, irrespective of size.

As of yesterday, 123 people were infected with coronavirus in Bangladesh and 12 killed by the deadly pathogen, according to the Institute of Epidemiology Disease Control and Research.

To flatten the curve on the novel virus, the government has essentially put the country on lockdown since March 26. The lockdown has now been extended to April 14.

Given that the country reported the highest increase in confirmed cases yesterday, it appears that the number of cases would blow up in the near future, necessitating further extension of the shutdown that has brought economic activities to a near halt.

"If a significant outbreak occurs in Bangladesh, the impact could be more significant," the ADB said on Friday.

The prime minister gave some examples of how the lethal, pneumonia-like virus is affecting the economy.

Import expenditure and export income fell by almost 5 per cent year-on-year so far in the fiscal year. This drop may be extended at the end of the fiscal year, she said.

Garment exports, which account for more than 80 per cent of the national exports, would be hit hard in the coming months as some retailers have cancelled $3.02 billion worth of shipment orders amid demand collapse in Western markets, according to data compiled by the Bangladesh Garment Manufacturers and Exporters Association showed. 

Private investment may not reach the expected level because of the delay in implementation of construction of ongoing mega projects, setting up of special economic zones and implementation of the single-digit interest rates.

There will be adverse impact on the services sectors, including hotels, restaurants, transport and aviation, the prime minister said.   

The purchasing capacity of the low-income people could be reduced as well as there could be disruption in the supply chain due to the long general holidays affecting the production of the SMEs and hindrance in the transport services.

Due to the decline in global demand, the world fuel oil price has reduced by more than 50 per cent. As a result, inward remittance flow will be affected.

Remittance, one of the lifelines for the economy, hit a 15-month low in March due to the economic fallout in the global economy stemming from the coronavirus pandemic.

"I hope our economy will rebound and we could reach near the desired economic growth, if the stimulus packages, the previous and the fresh ones, could be quickly implemented," the prime minister said.