Standard Chartered foresees fast recovery for Bangladesh

Bangladesh may recover faster from the pandemic-ravaged economic slowdown than many other economies, a leading global bank says, analysing the trends in some key indicators including external balance.

Balance of payment surplus, a healthy foreign exchange reserve and very low public debt-GDP ratio are among the factors that give Bangladesh room for boosting the growth, members of the global research team of Standard Chartered Bank said in a digital briefing Wednesday. The briefing was joined by a group of selected journalists from Dhaka-based newspapers.

Despite a global recession which is shaping up to be historic in scale, Bangladesh might be one of only two ASEAN and South Asian economies – the other being Vietnam – to register a positive growth in 2020, said Edward Lee, chief economist of Standard Chartered for ASEAN and South Asia.

Lower growth will partly be driven by a slowdown in key trading partners, with the Eurozone, US and Middle East likely to contract sharply inFY20 and FY21.

Briefly stating their observations about Covid-19 recovery of the world economy, Edward Lee predicted a V-shape recovery initially as governments across the world have taken up unprecedented monetary and fiscal measures to face an unprecedented crisis induced by the Covid-19 pandemic.

Effective and timely disposal of fiscal commitments, particularly smooth disbursement of fiscal stimulus, will instill confidence in the people, he said, stressing that businesses need to have their own standard operating procedures to recover from the shocks.

But the possibility of a second wave of infection, already seen in a number of countries, remains a concern, Edward added.

While uncertainties remain, the worst is most likely over, the Standard Chartered's leading economists told the media briefing.

Even though the economy faced challenges during the April to June period in the face of Covid-19, there were early signs of recovery in some pockets as the economy started to open in June, said Saurav Anand, the Bank's South Asia economist, during his presentation.

 "Recent data shows some recovery is underway. Bangladesh has room to boost growth," he said.

The global bank's economist for South Asia also sees further spaces for fiscal and monetary interventions in Bangladesh. A low ratio of public debt to gross domestic product, which is 33 percent-34 percent, leaves Bangladesh with a fiscal headroom to borrow low-cost funds from the global financial market, Saurav told the briefing.

Standard Chartered's Head of ASA FX Research, Divya Devesh, predicts that the US dollar is likely to depreciate as a result of Fed monetary policy. Euro is appreciating and gold is bullish, while the greenback is projected to remain under pressure in the next two/three years, he said, giving an overview of the global currency market.

"The US dollar-Taka exchange rate is very stable and foreign exchange balance is quite supportive," Devesh pointed out.

He referred to a surplus in balance of payment, recent increase in remittance inflow and an "all-time high" foreign exchange reserve of $37 billion.

"Bangladesh has ample dollars to tide over any difficulty," Devesh added.

Muhit Rahman, Managing Director and Head of Financial Markets of Standard Chartered Bank Bangladesh, said exports have picked up with new avenues opening for diversified products. "We have seen July growth in remittance… We are very optimistic about Bangladesh's economic recovery."

Replying to a question about how efficiently banks can reach out to pandemic-shattered small businesses, Muhit Rahman said a credit guarantee scheme will be helpful for banks to lend more to small businesses.

A low debt-GDP ratio provides the government with a 'unique opportunity' to borrow more from global sources at lower cost, he pointed out.

He believes that the initiatives of the new chairman of Bangladesh Securities and Exchange Commission will pave the way for a vibrant capital market both for local and foreign investors.

Standard Chartered Bank Bangladesh Head of Corporate Affairs, Brand & Marketing, Bitopi Das Chowdhury initiated the briefing while Manager for corporate affairs Saba Kabir moderated.

Earlier, over 300 clients joined the 2020 Bangladesh session of the Bank's Global Research Briefing series via video conferencing.

Bangladesh Securities and Exchange Commission chairman Prof. Shibli Rubayat-Ul-Islam, who joined the event as the chief guest, referred to the resilience demonstrated by the people of Bangladesh, the government and the business community during hard times in the past.

He added, "We expect Bangladesh to have V-shaped post-Covid recovery reaching back to more than 8 percent GDP growth trajectory within 2021."

"Bangladesh entered these turbulent times on a much stronger footing compared to many of its peers, due to low external debt, low overall public debt and comfortable debt service capability in view of its healthy foreign exchange reserve," said Standard Chartered Bangladesh CEO Naser Ezaz Bijoy.

"We can leverage our solid economic fundamentals and the innate resilience of our communities to quickly regain lost ground," he added.