Post Covid-19 vulnerability for South Asian countries like Bangladesh and Sri Lanka, would be handling informal labor markets and poverty impacted by the lockdown effort to stop the spread of coronavirus, experts said.
Economists from Bangladesh and Sri Lanka made the observation on Friday at a virtual panel discussion titled “Covid-19 and its Economic Impact on Bangladesh and Sri Lanka,” organized by the Institute of South Asian Studies, National University of Singapore (NUS).
This panel discussion discussed the prospects and challenges for Bangladesh and Sri Lanka in light of existing conditions and future prospects.
“The South Asian region holds the highest number of poor people in the world. Bangladesh's poverty rate is over 20%. But our estimation says if the lockdown prolongs by three months, then the poverty rate may go up to 41%, which would erase government achievements in poverty reduction of the last decade,” said Selim Raihan, executive director of South Asian Network on Economic Modeling (Sanem).
Not all people would be able to come out from poverty when economic activities return to normal, he added.
There is vulnerability in the labour market, where in Bangladesh more than 85% of labor is in the informal sector, while Sri Lanka has 60%-65% of its labor in the informal sector, said the economist.
“The Covid-19 outbreak occurred in South Asia much later compared to the rest of the world and it experienced it for the last four months, which hit the economy badly. World Bank forecast 1.18% to 2.8% GDP growth for the current fiscal year for this region, though this sounds better compared to the negative growth in other regions,” said Amitendu Palit, senior research fellow and research lead, Institute of South Asian Studies at NUS.
South Asia is going to be the worst performer since 1980 due to three main factors. First, due to the severe decline in demand for exports from a fall in consumption in North America and Europe, which has already affected Bangladesh and Sri Lanka's economies, he said.
Second, the economic contraction experienced by several job-intensive industries such as tourism, hospitality, civil aviation, retail, construction and housing – are all going to adversely influence economic prospects of South Asian countries, he added.
Third, inward remittances, particularly from Gulf countries, are expected to drop sharply following the return of migrant workers, Amitendu continued.
Bangladesh's budget allocation for healthcare is below 1% of GDP and with such poor allocation it is quite impossible to ensure adequate healthcare and face the crisis, said Selim Raihan, also a professor of economics at the University of Dhaka.
He suggested improving management quality and the proper utilization of funds.
As two of South Asia’s major economies with significant presence in global supply chains, Bangladesh and Sri Lanka are facing multiple challenges from Covid-19, said the economists who participated in the discussion.
These challenges, which will gradually evolve over the coming months, are compounded by economic exigencies of managing the heavy demand for expanding healthcare capacities to treat the infected, they said.
Such requirements, alongside financial support schemes for the economically affected, create onerous challenges for national governments at a time when internal revenues and foreign exchange earnings are declining, they suggested.
