Growth to continue despite pandemic

Mahmuda Shaolin 

Bangladesh economy will continue to grow and achieve the  growth target as the Bangladesh Bank (BB) expects that the  second wave of the Covid-19 pandemic would not harm the economy seriously.

At the same time, Covid-19 vaccine development would have a positive impact on the global as well as domestic economy, Bangladesh Bank opines.

Timely and effective responses to the Covid-19 pandemic have improved Bangladesh economy’s resilience and Bangladesh Bank’s expansionary monetary policy stance the government's fiscal stimulus measures are exactly what the economy needed, said the central bank in a review report on the country's economy.  

"Relying to these policy initiatives, two crucial components of aggregate demand - consumption, and investment - are showing signs of improvement in recent months, aided by hefty remittance inflows and increased money supply," said the BB in the report prepared by its Chief Economist’s Unit (CEU).

Like elsewhere in the world, the central bank said the Bangladesh economy was also badly affected by the pandemic but the economy managed to grow by 5.2 percent during fiscal year 2019-2020 (FY20), reflecting its robustness as compared to some South Asian  countries such as India, Pakistan, and Sri Lanka.

Though facing pandemic induced challenges, Bangladesh will come back to its economic  growth path in FY21, expecting continued huge remittance inflows and recovery in private sector credit growth, it said, adding that to achieve the targeted growth path, the BB is expected to continue its policy supports while the government has been providing necessary impetuses through stimulus packages for pandemic-hit economic sectors.

Referring to global economic situation amid Covid-19 pandemic, the BB said world trade has seen a larger contraction and is projected to decline by 10.4 percent in 2020, reflecting particularly a sharp fall in activities of contact-intensive sectors with much smaller trade intensity than manufacturing. But global trade began recovering in June and is projected to pick up at 8.3 percent in 2021, consistent with the projected recovery in global activity, it added. 

In the backdrop of the Covid-19 pandemic, the central Bank said the government and BB took a series of timely and appropriate initiatives such as stimulus packages of more than Tk 1.21 trillion, policy relaxations, low-cost refinance schemes, etc., among others, to support weaker segments of the economy and to ensure sufficient liquidity in the banking system.

"Aided by those prompt policy initiatives, the economic recovery of Bangladesh remained at the forefront of the neighbouring South Asian economies and attained a 5.2 percent growth rate in FY20 while growth rates of India, Pakistan, and Sri-Lanka are expected to be negative in 2020.

Industry and service sector activities are recovering aided by government and BB's continued supportive policy measures to boost the sectoral performances, the report said, adding that the industry sector has staged a magnificent turnaround from the pandemic deadlock with faster-than-expected growth of Quantum Index of Industrial Production (QIIP) at 7.94 percent up to December of 2021.

It said mostly manufacturing sector led by wearing apparel, textile, pharmaceuticals, non-metallic mineral product, leather and related products and chemical production spurred the QIIP. Besides, service sector related activities also climbed out from their pandemic depths, the report said, adding  that cargo handled through Chattogram port started increasing sharply after May 2020 and came back to the pre-pandemic level in November 2020. Private sector credit growth in trade and commerce and consumer finance increased significantly during the first quarter of FY21, it added.

The BB said the expected progress in the implementation of all supportive policy initiatives helped domestic demand to maintain at 5.05 percent growth of which four-fifth of the demand was contributed by private investment and consumption.

Domestic demand revived further as supported by more than 37.6 percent growth in inflows of workers' remittances during July – December 2020, it said, adding that external demand gained momentum with acceleration in export growth nearing 1.0 percent during July – November 2020 compared to a negative 8.22 percent growth at the same period of last year.

Bangladesh economy has recovered faster reflected in sector-wise performance for the first quarter of FY21 amid a dreadful situation as the pandemic continues.

Referring to a recent report published by FDI Intelligence, the central bank said Bangladesh is among the top five economies that are recovering faster. Recent impressive progress with more than 90 percent successful results for vaccine development against COVID-19 is indeed a good news for humanity which will impact positively the global as well as Bangladesh domestic economy, it observed.