Economic Impact of COVID-19 on Different Groups of Peoples in South Asia: Evidence from Bangladesh

Abstract

Within a couple of months, COVID-19 has evolved as an economic catastrophe beyond health cataclysm that was initially thought. It is already forewarned as to the deepest global recession since World War II. Bangladesh that represents the emerging market and developing economies (EMDEs) has suddenly fallen into a deep economic hole although unprecedented challenges resulting from the COVID-19 pandemic related to health, macroeconomic and social effects are on equal focus. World Bank, in its June 2020 estimation, has revised Bangladesh’s growth downward to 1.6 percent in FY2020 whilst Bangladesh achieved average GDP growth of 6.5% since 2004 and generally, the labor-oriented service sector contributes about 50% to this growth. It is estimated that the national (upper) poverty rate from 24.3 percent in 2016 already increased to 35 percent in 2020. Declining demands, as well as supply disruptions, have weighed significantly on exports, especially exports of textiles and clothing products. Banking sectors are in potential risk due to the increase of Non-Performing Loan (NPL) which are mostly associated with the RMG industry and its backward linkage industries. On the other hand, the RMG sector has started to suffer from both cancellations of order and supply chain interruption alongside hamper in production due to lockdown. Slower loan recovery rate is also a cause of greater headache of the banking sector in this pandemic period. 85% of the total employment of the country belongs to informal sectors. A sharp fall in overall consumption led to decline in overall trade as well decline in production except for foods and medical items. SMEs have seen revenue drop by at least 50%, while 52% of SMEs have locks hung over their businesses generating no revenue at all. These all will create a large spillover effect on the state economy. To build quick resilience, some fiscal measures have been taken by the government of Bangladesh. IMF, ADB, and World Bank promised to support US$730 million, US$ 600 million, and US$100 million respectively to increase social safety net. To build more and sustainable resilience, a number of interventions to be considered such as immediate access to capital and technology by small, medium, and regional clustered enterprises; proper guideline and financial support to forced migrant laborers, utmost attempt to collect the demographic dividend and more. The study stands for composition analyses of secondary data proceedings and literature on the previous pandemic.