Economy bracing for another Covid-triggered blow

At a time when dispelling all the blues, the country's economy is running on a strong recovery track – thanks to the return of export earnings, forex reserve and GDP growth to pre-pandemic levels, another blow in the form of Omicron wave looms large, economists say. 

They have suggested safeguarding poor working-class people who are at risk of potential impacts from Omicron as many of them are yet to see their income return to normal because the economic recovery is a mixed bag. 

Rigorous efforts by the people of all classes alongside government policy support have contributed to the economic rejuvenation, they pointed out at a webinar titled "State of the Bangladesh Economy in 2021" on Tuesday.

The Policy Research Institute of Bangladesh (PRI) organised the event.

Presenting a keynote titled "After the pandemic onslaught – economy on strong recovery path", PRI Chairman Dr Zaidi Sattar said Bangladesh's macroeconomic stability has been possible because of the government's bold steps and continuity of policy support.

The country's recovery process is faster than in many powerful countries in Asia. Bangladesh is one of the few countries to achieve positive growth, he noted.

Even though Bangladesh has been witnessing continuous economic growth over the last decade, Planning Minister MA Mannan expressed concern that Bangladesh might fall in the middle-income trap. 

Referring to many Latin American countries that got stuck in such a trap, he called upon research agencies to work on the issue seriously.

The planning minister expressed some doubts about whether the people are actually benefiting from rising growth in GDP size every year and a rise in per capita income. 

MA Mannan suggested conducting research to highlight the real benefits of GDP growth.

Moreover, he urged researchers at the programme to weigh up the extent of economic damage caused by political conflicts and violence.

Dr Ahsan H Mansur, executive director at the Policy Research Institute, said the state of current account and exchange rate are significant challenges for the economy.

"Our main concern is an emerging pressure on the balance of payment. Export is growing by 37%, but import is rising at a faster speed. Remittance is falling," he noted.

The current account deficit was recorded at $6 billion in the first five months, which was a $3 billion surplus over the same time last year. Maintaining the trend would create a $14-15 billion deficit. 

"Where will we get funding from to meet the deficit?" he questioned.

No country would maintain sustainability with a 50% import growth. It is possible but for a maximum of five months, he added.

The Bangladesh Bank, which is responding very slowly with respect to the exchange rate, should be more proactive to depreciate the value of taka.

He stressed reforms to increase tax collection and other revenues to increase the size of the national budget.

Rizwan Rahman, president at Dhaka Chamber of Commerce and Industry, said the economy is recovering but facing a tremendous space. There are not enough jobs in the private sector. 

The Bangladesh Bank changed the rates of repo, reverse repo and other instruments. But there was a lack of reforms that were much needed, he also said.

 The revenue collection is far behind the target, but the expenditure of the government has increased in the pandemic.

Despite an increase in foreign direct investments, the amount is lower to cover possible challenges stemming from the country's LDC graduation, Rizwan pointed out.

Mentioning that extreme poverty increased as people lost their jobs, he advocated for a comprehensive strategy to reduce poverty. 

Dr Monzur Hossain, research director at the Bangladesh Institute of Development Studies, said the export recovery is relevant to the global recovery, particularly in western countries. The recovery came on the back of the vaccine roll-out in the global market and Bangladesh as well. 

"We are in a very good position regarding vaccination, leading to the return of good confidence in individuals and businesses," he added.

Dr Sayema Haque Bidisha, research director at South Asian Network on Economic Modelling, said despite the supply chain being disrupted during the pandemic, the country's agricultural sector played a major role in food security. So, it is very important to ensure that the sector does not suffer in the future owing to Omicron. 

Sayema suggested increasing allocation in the next budget for the social safety net, focusing on limited-income people. 

Faruque Hassan, president at Bangladesh Garment Manufacturers and Exporters Association, said a good number of European countries imposed restrictions to contain the new wave of Covid-19. 

"The global supply chain collapsed during the first and second waves of Covid-19, we faced many unwanted situations, such as nonpayment, forced discounts, delayed payments and deferred shipments and so on," he noted.

Md Fazlul Hoque, former president at Bangladesh Knitwear Manufacturers and Exporters Association and managing director at Plummy Fashion, said the trade war between China and the United States and the lockdown in Vietnam helped Bangladesh's exports to bounce back.

The rapid export growth would not sustain further, with buyers, who had empty stores during the recovery stage, now having stocked up on products they need, he also said.

"I am not very worried about Omicron. People are now very desperate to continue their normal life across the world. They have now been vaccinated. They now have different types of medicines as well," he added.