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Dhaka Tribune

'Bangladesh battling against Covid-19, its economic fallout'

Many SMEs have been suffering tremendous setbacks in terms of production, marketing and sales

Update : 14 Dec 2020, 05:58 PM

Bangladesh was engaged in fighting two battles concurrently, one against the Covid-19 pandemic, and the other against its economic fallout, said Mahbubur Rahman, president of International Chamber of Commerce Bangladesh (ICCB) on Monday.

Speaking at the 25th annual council of the chamber, he said that the economic crisis is likely to trigger a series of corporate and household debt defaults turning into a financial crisis as well.

The observation was also featured in an ICCB executive board report unveiled at the virtual council, which also said that in such a situation economic risks are not only limited to short term, but also extends to major future productivity losses both through labour and capital.

Like most other emerging economies, Bangladesh has to tackle a number of key issues in order to achieve the desired GDP growth - which includes healthcare, sustainable export, FDI and remittance flow, Rahman said.

In Bangladesh, there are around 7.8 million enterprises and 90 per cent of them are micro (including cottage) enterprises. This sector contributes around 25 per cent to the GDP, amounting to around $79 billion.

Besides, many SMEs have been suffering tremendous setbacks in terms of production, marketing and sales, he also said.

Bangladesh's graduation from the LDC status by 2024 will lead to the loss of trade preference in major export destinations and loss of other preferences. Therefore, Bangladesh must focus on FTAs with major trading countries, the ICCB president said.

The executive board report also said the second wave of Covid-19 has already started in Europe and US, which will further prolong the economic downturn.

Like most other emerging economies, Bangladesh will also be affected and will have to tackle a number of key issues in order to achieve the desired GDP growth, which include healthcare, sustainable export, saving MSMEs, sending back stranded expatriate workers  to their workplace to maintain the remittance inflow and attracting more FDIs, the report also said.

Besides, in order to maintain sustainable growth and to keep the supply chains functional and cost effective, it is very important to save micro, small and medium enterprises (MSMEs), it said.

The pandemic has created a massive economic contraction that will be followed by a financial crisis in many parts of the globe, as nonperforming corporate loans accumulate alongside bankruptcies. Sovereign defaults in the developing world are also poised to spike. This crisis will follow a path similar to the last crisis and the crisis will hit lower-income households and countries harder than their wealthier counterparts, the report observed.

Sovereign defaults in the developing world are also poised to spike. This crisis will follow a path similar to the pandemic, which will hit lower-income households and countries harder than their wealthier counterparts, it also said.

To prevent the economic crisis from spiralling like it did during the pandemic, the ICC released a call to action encouraging governments to ensure that stimulus efforts flow rapidly into the real economy and provide direct and immediate support to MSMEs and their workers to ensure their continued operation.

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