A bleak picture of Bangladesh economy
The coronavirus pandemic will drive an additional 13 million people into poverty, cut 3.7 million jobs, take budget deficit to as high as 7.5 % and inflict a minimum revenue lack of 2 % of GDP in Bangladesh as the killer bug is wreaking havoc through the entire economy, the Asian Development Bank (ADB) has warned.
The grim picture was painted as the Manila-based development lender yesterday approved yet another $500 million loan for Bangladesh to bolster its efforts to control the impact of the pestilence on the economy and the general public health.
This is actually the first budget support from any development lender to Bangladesh following the outbreak of the coronavirus, since it seeks a lot more than $3 billion primarily from development partners to ward off the impact of the virus and attempt implementing its $11.3 billion-strong stimulus packages.
The Asian Infrastructure Investment Bank (AIIB) is likely to provide $250 million in co-financing with the ADB to support the government's programme.
This package will build on ADB's ongoing collaboration with Bangladesh on structural reforms by supporting the federal government efforts to increase the country's social and economical recovery, said ADB President Masatsugu Asakawa in a news release.
"We will work closely with the federal government and development partners to mitigate the monetary impact of the pandemic on the poor & most vulnerable, particularly those afflicted by job losses in small and medium enterprises and the informal sector."
Since March 26, Bangladesh has nearly shut its entire economy to flatten the curve on coronavirus.
Still, the united states is moving to the fourth stage of infection (community transmission), with 59 of the country's 64 districts affected.
As of yesterday, the full total number of infections and fatalities stood at 12,425 and 199 respectively.
"Given the density of the country's population, sizable slum population and underdeveloped medical system, Bangladesh faces significant challenges in containing the condition," the ADB said.
On April 30, the ADB approved a $100 million concessional loan to support Bangladesh to address the immediate public health requirements of combatting the pandemic.
The lending company also released a $350,000 emergency grant for the procurement of medical supplies and equipment and $1.3 million from a preexisting project to supply one-time cash support to 22,619 trainees to permit them to keep their ongoing skills training programme.
COVID-19 IMPACT
In 2019, over 34 million people, or 20.5 % of Bangladesh's population, were poor and 17 million, or 10.5 %, were extremely poor. The shutdown and the consequent monetary disruptions have led to a spike in poverty.
The International Food Policy Research Institute estimates that an additional 42 million persons in South Asia could fall into extreme poverty in 2020 due to the pandemic.
For Bangladesh, the ADB estimates that the pandemic is likely to drive yet another 7.7 % of the populace or near to 13 million persons into poverty.
The gross domestic product (GDP) growth rate is projected to decline to 3.8 % this fiscal year 2020 from 8.2 per cent in fiscal 2018-19, the ADB said, quoting data from the International Monetary Fund.
This might be the slowest growth rate since 2002, which is leaner than the 5 % growth at the height of the global financial meltdown in 2009.
The nationwide stay-at-home order has resulted in simultaneous supply and demand shocks, with production, consumption, trade and investment all at a standstill.
Many informal workers, which take into account 85.1 per cent of the workforce, lost their livelihoods instantly.
Having less social back-up coverage will bring about dire consequences for the a lot more than 20 % of the populace who live below the poverty line and the many newly jobless who'll join them.
By sector, the industry is expected to decline by 2 % (from 12.7 % in fiscal 2018-19) and services by 3.5 % (from 6.8 % in fiscal 2018-19).
The original growth drivers of the economy -- export-oriented industries, remittances, domestic consumptions, and SMEs -- have all ground to a halt.
Exports have been one of the key drivers of economical and social development in Bangladesh. The growth rate was 10.9 % in 2019 but a decline of 19.8 per cent is expected in fiscal 2019-20.
Total remittances are anticipated to stagnate in fiscal 2019-20 and drop sharply in fiscal 2020-21.
The reduction in remittance inflow will impact consumption and put the livelihood of several migrant workers' families at risk.
In April, inflows hit a 34-month low of $1.08 billion, down 25 per cent from a year earlier.
Domestic consumption makes up about 75 per cent of the economy. Google's mobility report provides indications of the cliff-like drop of domestic consumption that may severely impact retail, accommodation, restaurants, and transportation sectors of the economy.
Consumption in the retail and recreation sector crashed 76 per cent between February 29 and April 11, in grocery and pharmacy 55 % and the transportation sector 72 per cent, according to the Community Mobility Report.
The pandemic is having a substantial impact on the fiscal position.
Prior to the pandemic, the economy was on track to grow by 7.8 % this fiscal year. The budget deficit was expected to go back to the 5 % range after a non permanent jump to 5.5 % in fiscal 2018-19 because of elections.
According to the Manila-based multilateral lender's estimate, the fiscal deficit will probably rise to 7.5 % of GDP in fiscal 2019-20.
The pandemic and consequent stoppage of financial activities are anticipated to considerably reduce tax receipts. Non-tax income may also be severely damaged by the reduced amount of imports and other payment sources.
A minimum revenue loss of 2 % of GDP ($6.7 billion) is projected by the federal government.
The Bangladesh economy stands to lose an astounding $13.3 billion for the coronavirus outbreak, the ADB said earlier this month, which is 4.9 % of its GDP.
BANGLADESH'S FUND REQUIREMENT
Bangladesh has taken prompt actions to control the spread of the condition and manage its effect on health, welfare, and the economy under its COVID-19 response plan, the ADB said.
A social protection and monetary stimulus package amounting to Tk 95,619 crore, or $11.3 billion, equal to 3.5 per cent of the GDP has been announced.
With rising expenditure and declining revenues, additional government financing requirements in fiscal 2019-20 are estimated at $8.8 billion, or 14.2 % of the this fiscal year's budget.
About $2.9 billion of the deficits will be financed through external sources and $5.9 billion from the domestic market.
Of the foreign portion, Bangladesh hopes to get $600 million from the ADB, $250 million from the AIIB, $100 million from the World Bank, $700 million from the IMF and $1.239 billion from other sources.
FURTHER CHALLENGES FACING BANGLADESH
Delayed implementation of the financial stimulus or inadequate size may decrease the effectiveness of the programme and significant escalation of the pandemic may bring about serious disruptions in government work that may hamper programme implementation too, the ADB said.
Insufficient internal control may bring about reduced efficiency, fairness, and transparency of the federal government support programme.
The lender cautioned that the government's intend to fund a significant part of expenditures from domestic sources may not succeed if the pandemic situation deteriorates.
The federal government has been prudent in raising external debts, with low external debt-gross domestic product ratio of 15 per cent.
Tapping different funding channels is highly recommended and ADB will continue to engage the government to evaluate various strategic options, it said.
Finance Minister AHM Mustafa Kamal thanked Asakawa for approving the loan in that short period.
