How are we healing the chronic wound in our economy?

As our policymakers still expect a V-shaped recovery, the trajectories of the recovery of global two giants and other economies are now a fresh reminder that getting back the coronavirus pandemic stricken economy on its feet will remain hard in the coming months too.   

USA, the world's largest economy, is still scrambling to control the virus surge as a second wave of coronavirus cases spreads across the country. Economists say fear of the disease likely plays a bigger role in stalling business activity than any rules that the governments put in place, reports CNN. Experts are warning - as New York Times reports – of a gathering storm of corporate bankruptcies.

The second largest economy, China, that has largely contained the virus, is doing better than others. Recently released data of June provides evidence that its economy returned to growth in the second-quarter after a deep slump at the start of the year.

But domestic consumption and investment remain weak. Chinese Premier Li Keqiang has recently warned that a hard battle still lies ahead as the situation remains severe both at home and abroad.

Europe offers little hope yet. Countries worst hit by the virus such as UK, Italy, Spain and France are struggling to boost their economies even after they have flattened the Covid-19 curve. EU member states have responded not as a unified entity, but on a nation by nation approach with each government putting the interests of its own people first. They are now preparing a combined battle plan to make a big push to Europe's economy. 

Economies in some Asian countries such as South Korea, Vietnam and Taiwan that have largely contained the virus have faced contractions and are fighting hard to boost up businesses as global trade remains almost paralysed and an unprecedented travel restriction has crippled civil aviation and tourism industries.    

Money and job worries pose a real risk to recovery of every economy reeling from the shock of the shutdown by the pandemic, despite 11trn dollars in stimulus packages rolled out by the governments to save jobs and ensure the flow of cash.

Early in the crisis, most people anticipated a quick V-shaped recovery, on the assumption that the economy merely needed a short timeout. But such hopes have diminished as the virus remains untamed. Since May, economists have been warning that a V-shaped recovery of the global economy has turned into a fantasy and the impact of damage caused by the pandemic may last for years.

In the last seven months, the virus has infected more than 14 million people and killed over six hundred thousand people across the globe. It still remains active - killing and infecting more every day and resurged in many countries that had earlier largely contained the contagion.

IMF Managing Director Kristalina Georgieva fears a second major global wave of the disease could lead to further disruptions in economic activity. Other risks include stretched asset valuations, volatile commodity prices, rising protectionism, and political instability, she wrote on Wednesday.

Every sign indicates we are not out of the woods yet. And nobody knows for sure how long it will take to get back to normalcy. 

Our policymakers however have dreamt of a V-shaped recovery at a time when the hopes for a quick rebound of the global economy has faded away. They have set a target of 8.20 percent economic growth this fiscal year that began in July. But that strong expectation is not supported by the reality on the ground.

The pandemic fallout is so brutal that it has upset many of our successes. Poverty rate may have doubled to 40 percent as millions of workers in informal sectors have become jobless. The relief measures sponsored by the government remain mired in controversy over anomalies. 

The major sub-sectors of the rural economy such as poultry, dairy, fishery and vegetable farming are also badly hit due to supply chain disruption and a slump in demand caused by diminishing incomes.

The situation in the SME sector is the worst. Small businesses in the informal sector are the biggest employer and the worst hit by the shutdown, throwing millions – waged and self-employed – out of work.

Therefore, the employment growth in the service sector that is supposed to overtake the farm sector is facing a setback due to the reverse migration of people from cities to villages for livelihood.   

In the last one and half months since reopening of the economy after the end of shutdown, there has been no sign of a strong rebound. All indications are that the economy, coming out of the coma, will go through a hard recovery. The pandemic has made uncertain our graduation from LDC category in 2024 and has challenged our desire to become a middle income country by 2021.

The new annual budget could not generate much hopes due to lack of a specific roadmap to reboot the economy that has faced contraction for the first time in decades.

Economist Zahid Hussain finds the new fiscal year's budget "divorced from reality". The budget talks the talk as it rightly points out expenditure priorities for economic and public health recoveries. But when it comes to walking the talk, disconnect starts right from macro framework to implementation, he said.

Like other economies, the Bangladesh government too announced a series of stimulus packages – to the tune of Tk1 lakh crore or over 3 percent of the GDP. But many businesses are complaining that they are not getting loans under the stimulus package.

Unfortunately, we don't have a real picture on our economic damage during the last three months, starting in March. The government is yet to release the economic review of the last fiscal year. Every year in past it was released in June, on the day the finance minister placed the budget in parliament for the next fiscal year.

The Bangladesh Bureau of Statistics has no plan to review quarterly performance of the economy, considering the nature of the unprecedented economic crisis induced by the virus.   

Three years ago, the BBS had taken an initiative to release economic data quarterly. But that move did not see the light of day.

"Many countries release data on the performance of the economy quarterly. We need to do so. We will take measures in this regard in future," Tazul Islam, director general of BBS, told The Business Standard.

During the pandemic, quarterly review of the economic performance is an important step. As there is no sign of the virus curve being flattened, it is difficult to hope that the pandemic will completely be contained in the next two months. That means the first quarter of the current fiscal year will end with the virus remaining active.

The second quarter from October will begin with a hope that a vaccine may be available at the end of the year or early next year. If the world gets an effective vaccine, the situation may continue to improve, subject to availability of vaccine for our people. If luck favours us, we may get some relief in the next year when the second half of this fiscal year will begin.

"Medical breakthroughs on vaccines and treatments could lift confidence and economic activity. These alternative scenarios highlight that uncertainty remains exceptionally high", says the IMF chief.

Economist Joseph Stiglitz says obviously, the health emergency must be addressed, because there can be no economic recovery until the virus is contained.

So our recovery plan should focus on the behaviour of the virus and efficiency to contain it. Moving toward with a single plan for an entire year is not prudent right now.

The performance of the economy if reviewed quarterly may help to take necessary corrective measures to boost the recovery.

Another thing still remains a mystery. The policymakers have set the growth target for this fiscal year, but the government is yet to release GDP growth data of the last fiscal year that ended in June.

The Finance Division has estimated that the GDP growth may have decreased to 5.2 percent from 8.15 in the previous year. That is a gulf of a gap with the forecast of the World Bank. 

In April, the World Bank said the coronavirus pandemic was set to bring down Bangladesh's gross domestic product growth from a high-flying 8.15 percent last year to just 2 percent this year ending on June 30. The highest growth rate was predicted to be a bleak 3 percent.

Two months later, it came up with an even more shocking forecast. In its June 2020 Global Economic Prospects report, the World Bank projected Bangladesh's GDP growth to come down to only 1.6 percent in the current fiscal year ending on June 30.

The forecasts are shocking for an economy that was recording on an average 7 percent growth for the last decade and had a planned to bag some big successes in this new decade.  

All private data also shows that our economy has been hit badly. The virus caused a growing economy to bleed heavily.

Amidst all these odds, the hope for a V-shaped recovery could have gained ground had the virus been contained as early as some other countries such China and South Korea did.

The most used cautionary warning during the pandemic 'no health, no recovery' has now become a universal truth for all of us. Poor performance of our fragile health sector to fight the pandemic has eroded public trust, which matters most in recovery from any big crisis. That has made the road to recovery bumpy.

In addition, absence of extraordinary measures to face the unprecedented crisis have let the challenges grow bigger and bigger. The prospect of healing the chronic wounds of our economy is hanging in balance. That means people will have to continue their struggle for both life and livelihood for an indefinite period.