Saturday | 11 January 2025 | Reg No- 06
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Saturday | 11 January 2025 | Epaper

COVID-19 outbreak decreases economic growth

Published : Wednesday, 1 April, 2020 at 12:00 AM  Count : 387
Nazmul Karim
Nazmul Karim

Nazmul Karim

Along with the entire world Bangladesh is also facing challenges in overcoming slowdown caused by coronavirus breakout. In the growing uncertainty of the situation the impact is already there in export, import and domestic market.

Apart from foreign currency earning, slowdown can be witnessed in the major exporting sector, the garments sector, few other domestic sectors particularly construction sector which is related with dozens of subsectors including ceramics, tile, cement, cables and many other industries.

The global slowdown can create an impact on Bangladesh's gross domestic product that Asian Development Bank (ADB) in its analysis said that as much as 1.1 per cent in the hypothetical worst-case scenario can be perceived in economy due to the outbreak of coronavirus in Bangladesh. That means the COVID19 could wipe $3.02 billion off the $324 billion-plus economy and 894,930 jobs will be lost, the multi lending agency said.

Apart from construction Bangladesh's other sector tourism, domestic production of many essential which is dependent for its raw materials import on china and country's small and medium enterprises are likely to face upcoming challenges. The ongoing COVID-19 outbreak whose epicenter was Wuhan of China has affected the entire world that over half a million people around the world have been infected and more than 28 thousands died due to this deadly virus. The ADB analysis explored three scenarios given the very large uncertainties. In the best-case scenario, steps were taken to contain the outbreak relatively quickly, with travel bans and precautionary behaviour abating after two months. In the moderate scenario, the outbreak is more widespread and long-lasting, with travel bans and precautionary behaviour abating only after three months; there is a larger decline in China's consumption
growth of 2 percentage points for the year, relative to a no-outbreak scenario.

In the worse-case scenario, the outbreak is even more protracted, with precautionary behaviour and restrictive policies remaining in place for six months; there is a large decline in both  consumption and investment growth in China, with both down by 2 percentage points
relative to a no-outbreak scenario. In the hypothetical worst-case scenario, the duration of travel bans and sharp decline in domestic demand will be six months in China and the outbreak in other developing economies lasting three months. In such cases, there will be 2 per cent point decline in China's consumption relative to no-outbreak scenario. In the best case scenario, the country's GDP will lose $8.37 million and there will also be job cuts for 1,870 people. In the moderate and worse cases, there will be GDP loss of $15.84 million and $30.31 million and job cuts of 3,790 and 6,950 respectively.

These should not be interpreted as a prediction that an outbreak will occur in any of these economies. In most of these economies there are very few cases of the COVID-19, according to the ADB. In Bangladesh, tourism revenues will decline by 0.001 per cent in the best-case scenario, 0.002 per cent in the moderate case scenario and 0.003 per cent in the worst-case scenario.

The range of scenarios explored by the ADB suggests a global impact of $77 billion to $347 billion, or 0.1 per cent to 0.4 per cent of global GDP, with a moderate case estimate of $156 billion or 0.2 per cent of global GDP. There is no doubt that there will be at least short-term impact. And if the outbreak persists for a long time, this will have far-reaching impact not only on Bangladesh but also on the global economy. The barriers to imports from China, the epicentre of the virus, will hamper the export-oriented sectors and disrupt the supply chain, according to the finance ministry, adding that the overall trade may be affected to some extent because of the coronavirus.

The coronavirus pandemic situation has triggered the price hike of petroleum oil which has started plunging of the stock prices all over the world. Amid lockdowns and shutdowns all around, there is now a near-consensus about the onset of another global recession.
But major concern is on health-related ones. This is because compared to the number of coronvirus-related fatalities, the global trade regime is undergoing such severe disruptions that many more people are becoming bankrupt and innumerable people are losing their
jobs. Bangladesh is not an exception to this and our government has already declared an amount of Tk. 50 billion as stimulus package to the export oriented factories. Besides it has given the bank borrowers some facilities. Before June no one will be degraded from their existing status as borrowers.

The BB has also given other facilities in purchasing treasury bills and few has recommended for purchasing some dollars by the central bank for maintaining bank liquidity.
Although the time has not yet come to make a final assessment of the resultant economic ills for economic losses in the world as well as in Bangladesh, the Bloomberg has estimated the potential losses to be US$2.7 trillion. The rich nations' club OECD (Organisation of Economic Cooperation and Development) has projected the likely losses to be up to 1.5 per cent of the global GDP. But proving the Bloomberg wrong, retail sales in China already fell by 20.5 per cent instead of the predicted 4.0 per cent, and her manufacturing, mining and utilities activities shrunk by an alarming 13.5 per cent during January-February period alone.

However the Bloomberg didn't specifically estimate on a country. The ADB with regard to Bangladesh says that employment may shrink by 900,000 over one year and the loss to the country's GDP may be total $3.02 billion (which I have already mentioned earlier that the loss is equivalent to 1.0 per cent of GDP). At disruption in import of raw materials from China for the main export earning source of RMG export has been severely hit by the pandemic resulting the purchase orders have gone down steeply, including 25 per cent for the readymade garments (RMG) sector.

A major cause of disruptions in RMG production has been the decline of imported Chinese fabric and other raw materials in local factories. Therefore, to make the RMG sector sustainable, Bangladesh has no other option but to aggressively pursue local and foreign investments in the textile sector in order to reduce dependence on external supplies. Travel and tourism is another sector that has already taken a big hit, as the period between January and March (also December in previous year) is usually its peak season. The hotels, motels and resorts in Cox's Bazar are expecting their worst loss in a decade as the flow of tourists has gone down dramatically.

The leather industry is another sector that has taken a hit due to over dependency on China as its major per cent of chemicals are outsourced from China. Construction sector mainly the government's different mega projects which are dependent on Chinese workers may also face a setback and the construction materials manufacturing industrial units are to count loss due to slow demands in the Coronavirus pandemic situation.

The ceramics and tiles industrial units are also to face losses as currently all types of construction are stopped due to the outbreak. The sector is also exporting its state of the art products in different counties which is uncertain as the importing countries at this moment are fighting against the virus to protect their public health. Therefore, it is imperative that the government look into this sector more carefully as thousands of people are employed and billions of taka has been invested.

The writer is Managing Director of the Bridge Chemie and an expert in ceramic and tiles sector




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