The World Bank (WB) on Sunday forecast the grim picture for the economy, saying the country’s economic output would come down to 2%-3% in the current fiscal year as a consequence of the pandemic COVID-19.
The WB report, titled, "South Asia Economic Focus”, anticipated a sharp economic slump in each of the region’s eight countries, caused by halting economic activity, collapsing trade, and greater stress in the financial and banking sectors.
“Bangladesh’s economy will be significantly impacted by the COVID-19 pandemic. The decline in national and global demand for manufactured goods, particularly in the garment sector, risks creating unemployment and deepen poverty,” says the report.
“The urban poor will be hardest hit while the number of additional poor will be higher in rural areas. The national shutdown will impact private consumption. While growth is expected to recover over the medium term, downside risks remain, particularly from a domestic outbreak of COVID-19 and fragilities in the financial sector.”
“The extent of the impact of the pandemic will depend on the duration of the crisis and the mitigation measures taken,” said Mercy Tembon, World Bank Country Director for Bangladesh and Bhutan.
“The Bangladesh government has acted quickly with public health directives, stimulus package, and scaled-up social protection programs. Earlier this month, the World Bank approved a $100 million financing to help detect, prevent, and respond to the COVID-19 outbreak and protect the people. We are committed to help Bangladesh tackle the pandemic, accelerate recovery, and build resilience,” added Mercy.
Regional growth to fall between 1.8% and 2.8%
In this fast-changing and uncertain context, the report presents a range forecast, estimating that regional growth will fall between 1.8 and 2.8 percent in 2020, down from 6.3 percent projected six months ago.
That will be the region’s worst performance in the last 40 years, with temporary contractions in all South Asian countries, adds the WB.
In case of prolonged and broad national lockdowns, the report warns of a worst-case scenario in which the entire region would experience a negative growth rate this year, it says further.
The decline in national and global demand for manufactured goods, particularly in the garment sector, risks creating unemployment and deepening poverty, it said.
The urban poor will be hardest hit while the number of additional poor will be higher in rural areas.
The report said the impact of the coronavirus will hit hard low-income people, especially informal workers in the hospitality, retail trade, and transport sectors who have limited or no access to healthcare or social safety nets.
The report noted that the Covid-19 shock will likely reinforce inequality in South Asia.
As played out across the region, the sudden and large-scale loss of low paid work has driven a mass exodus of migrant workers from cities to rural areas, spiking fears that many of them will fall back into poverty, it says.
While there are no signs yet of widespread food shortages, the report warned that a protracted Covid-19 crisis may threaten food security, especially for the most vulnerable.
"The Covid-19 crisis is also an urgent call-to-action moment to pursue innovative policies and jumpstart South Asian economies once the crisis is over. Failure to do so can lead to long-term growth disruptions and reverse hard-won progress in reducing poverty."
Recommendations
In the short term, the report recommended preparing weak healthcare systems for greater Covid-19 impacts, as well as providing safety nets and securing access to food, medical supplies, and necessities for the most vulnerable.
To minimize short-term economic pain, the report called for establishing temporary work programs for unemployed migrant workers, enacting debt relief measures for businesses and individuals, and easing inter-regional customs clearance to speed up import and export of essential goods.
Once lockdown restrictions are loosened, South Asian governments should adopt expansionary fiscal policies combined with monetary stimulus to keep credit flowing in their economies, it recommends.
World Bank Chief Economist for the South Asia Region Hans Timmer said: "After tackling the immediate Covid-19 threat, South Asian countries must keep their sovereign debt sustainable through fiscal prudence and debt relief initiatives. “
"And looking beyond the present crisis, lie great opportunities to expand digital technologies for payment systems and distant learning to unlock remote areas in South Asia."
