Business Desk
"Bangladesh's economy is now rebounding from the Covid-19 shocks due to the time-befitting steps of the government alongside implementation of the stimulus packages", said the Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI), adding that some major challenges are there in some areas for maintaining its growth momentum.
The challenges are - slow implementation of the government's development projects, unemployment situation, lower investment trend and sluggish growth of tax-revenue income, the trade-body opined in its Review of Economic Situation in Bangladesh for the last October-December period (Q2 of FY 21) on Thursday.
"Turning to FY 21, economic conditions seem to have been gradually improving after the easing of restrictions in late May 2020, supported by the government policies."
The MCCI said the major macro-economic indicators like inward remittance, foreign currency reserve, money supply and inflation remained satisfactory during the quarter under review (Q2 of FY 21). The exchange rate has long been stable, while the current account and balance of payments account are also in positive trajectory.
Although a large segment of informal industries, services and other activities have resumed their operations, these seem to be running at a much lower level of their capacities, the chamber mentioned.
"The export-oriented garment and leather, and the domestic market-oriented steel, food-processing and transport sectors are not running in full scale yet", the MCCI said, suggesting that these positive changes need to be interpreted carefully. It, however, opined that private investors are trying to cope with the situation instead of making further investments. The MCCI also suggested that there is a need for significant rise in the public and private investment in the country to help maintain competitiveness and foster further growth.
"Employment cannot grow fast enough when private investment is stagnating. Private investment in the country has been hovering around 22-23 per cent of the GDP for many years."
The review further said domestic reforms as well as initiatives are urgently needed to liberalise trade policy regime for improving the investment climate and rejuvenating employment growth.
In its sector-wise review, the MCCI said due to slower economic activities, caused mainly by Covid-19 in the previous months, the country's industrial sector recorded a lower growth (6.48 per cent) in FY 20, compared to 12.67 per cent in FY 19.
In the broad industry sector, the manufacturing sub-sector recorded a lower growth of 5.84 per cent in FY 20 mainly due to Covid-19, compared to the previous fiscal year's 14.20 per cent.
To overcome the possible impact of the pandemic on the sector, the government announced a bail-out package of Tk 300 billion for the affected industries and service sector organisations to provide working capital through banks at low interest rate in April 2020, it mentioned. Tax revenue collection under the National Board of Revenue (NBR) lagged behind by Tk 307.91 billion or 21.80 per cent against the target of Tk 1,412.25 billion set for H1 of FY 21.
The NBR collected Tk 1,104.34 billion in July-December of FY 21 compared to 1,062.42 billion in the corresponding period of the previous fiscal year, the MCCI noted.
On the other hand, the ADP implementation rate in the first half of the current fiscal year was lower than that in the corresponding half of the previous fiscal year.
Referring to official data, it said 58 ministries and divisions could spend Tk 512.66 billion or 23.89 per cent of the total allocation of Tk 2,146.11 billion in July-December of FY 21 in the aftermath of Covid-19.
In the corresponding period of the last fiscal, Tk 571.96 billion was spent, which was 26.59 per cent of the total outlay (Tk 2,151.14 billion), added the MCCI.
However, the country's inward remittance in the quarter under review (Q2 of FY 21) grew by 27.47 per cent to US$6.23 billion from $4.89 billion in Q2 of FY 20 despite the ongoing pandemic.
The government incentive and the latest policy support provided by the Bangladesh Bank (BB) helped boost the remittance growth.
The MCCI said the country's overseas employment sector has been facing a blow due to the Covid-19 outbreak.
"Although there was an apprehension that about 1.0 million migrant workers might return home amid the pandemic, about 0.326 million have returned so far, according to the Ministry of Expatriates Welfare and Overseas Employment," it mentioned.
