Credit growth rises in February, but Covid 2nd wave creates fresh worries

Private sector credit growth increased slightly in February this year from the previous months in keeping with the recovering trend of the economy since the end of last year, but the second wave of Covid-19 infections is feared to pose a roadblock to this positive trend. 

According to data from the Bangladesh Bank, the year-on-year credit growth in private sector stood at 8.93% in February, up from 8.32% in January.

Stakeholders concerned say the economy has been on a recovery phase since the end of last year, which has had a positive impact on credit growth in February.

Abul Kashem Khan, former president of Dhaka Chamber of Commerce and Industry (DCCI) and chairperson of Business Initiative Leading Development (BUILD), told The Business Standard, "After the vaccination started, there was a glimmer of hope in everyone, which in turn encouraged the private sector to increase investment."

"However, entrepreneurs are increasingly worried about the way the second wave has started since mid-March. The effect may be felt in the April-June quarter," he added.

He further said the overall private investment has been in a downturn for a long time – even before the outbreak of Covid-19. Now that fresh uncertainties have emerged, he sees no hope of new investment.

Basically, there has not been much change in the credit growth over the last one year.

The growth rate surpassed 9% at the beginning of the current financial year due to the waiver of the stimulus packages, but it came down to 8% again from October and remained in flux till January.

In such a scenario, the target for private sector credit growth for the second half of the current fiscal (January-December) was revised down from 14.8% to 11.5% last December.

Towards the end of the year, many factories began to increase production as the grip of Covid-19 loosened. However, traders are worried about the direction the situation will take if the infection increases again.

In this context, BUILD chairperson Khan said, "At the end of last year, we were focused on increasing production. However, it is difficult to say which way the new situation will go."

Syed Mahbubur Rahman, former chairman of the Association of Bankers Bangladesh (ABB) and managing director of Mutual Trust Bank, told The Business Standard that the recovery of the economy stumbled due to the shutdown situation around the world.

He added that the private sectors credit growth will not increase much in the coming days.