BD economy to remain strong if COVID-19 crisis managed well: ADB

Manmohan Parkash, ADB Country Director of Bangladesh

NEWS DESK 

The economy of Bangladesh is expected to remain strong in the fiscal year 2020, with a strong GDP growth rate of 7.8 percent, according to the latest Asian Development Bank (ADB) report.

The report, Asian Development Outlook (ADO) 2020 – ADB's flagship economic publication – forecasts that Gross Domestic Product (GDP) of Bangladesh is expected to grow by 7.8 percent in FY2020 and 8 percent in FY2021.

These growth forecasts rest on several assumptions of continued political calm, maintained consumer and investment confidence, depressed exports and imports in FY2020 and recovery in FY2021, expansionary central bank monetary policy, and favorable weather. The forecasts do not reflect the impact of the COVID-19.

"Bangladesh's economy continued to perform well despite the global economic slowdown. However, there exists a downward risk due to the COVID-19 global pandemic," said Manmohan Parkash, country director of ADB.

"ADB's preliminary estimates indicate that about 0.2 to 0.4 percent of Bangladesh GDP may be lost due to spillover effects of the global COVID-19 pandemic. If a significant outbreak occurs in Bangladesh, the impact could be more significant," he added.

"The outlook will be updated as more information becomes available. To cope with and mitigate the impact of the COVID-19, ADB is committed to support and collaborate with Bangladesh," he added further.

Appreciating the government's recent interventions, Manmohan Parkash said, "Addressing cash management challenges and broader resiliency issues due to COVID-19 related shutdowns and economic knock-ons could help minimize impact on Bangladesh economy."

Manmohan Parkash said, "Bangladesh needs to inject more cash into the economy to tackle the impact of novel coronavirus (COVID-19) pandemic."

He also underscored the need for scaling up heath expenditures and tapping all sources of affordable funding to combat the outbreak.

“There is unanimity that the Covid-19 pandemic will affect the economy. Bangladesh economy is largely dependent on trade, remittances and domestic consumption. The challenge is how to minimise it. The interventions and response plan need to be designed from this perspective,” he added.

The ADB country director said the government of Bangladesh needs a mix of fiscal and monetary interventions like injecting cash into the economy by providing stimulus package as a priority.

He said this could cover social safety net payments; cash support to the vulnerable including informal workers and daily wagers; liquidity support to businesses, including small and medium-sized enterprises; tax rebates; tax incentives; tax holidays; tax reliefs; tax cuts; delayed interest payment opportunities for businesses and industries; and soft loans or interest free credit, among others.

“Health expenditure should be scaled up, cash payments to people and businesses should be prioritised and started immediately. Implementing actions quickly is critical. Quick actions will help restore confidence and ensure quick recovery or V-curve.”

Parkash also suggested that all sources of affordable financing, including grants, low cost debt and reserves, should be tapped.

“A cash stimulus equal to the upcoming economic impact, may help economy jump-start quickly. This must be done in tandem with addressing the health emergency on a ‘war footing’. If done in a coordinated manner, this will not only help flatten the curve but will also make it a temporary shock.” he said.

Appreciating Bangladesh government’s recent interventions to face this deadly virus, Parkash said these are actions in right direction.

He suggested addressing cash management challenges and broader resiliency issues due to Covid-19 related shutdowns and economic knock-ons could help minimise impact on Bangladesh economy.

Noting that the exports are largely dependent on demand from the advanced economies, Parkash said with Europe and the US affected, there may be longer-term impact: staff lay-offs, unclaimed inventory, and cash flow problems due to cancellation and shortage of orders.

He said the other key impacts are likely to be drop in demand, both domestic and overseas; liquidity crunch; reduced remittances; drop in consumption; layoffs contributing to higher unemployment, reduced corporate cashflows, and curtailed wages.

The corporates may have to dig into savings and surpluses, and people may also have to rely on their savings because of layoffs, he added.

“The longer the lockdown, the more will be the economic losses. To contain this, we need a balanced strategy, where we go for targeted lockdowns, and opening of businesses with proper precautions,” he said, adding the government needs to arrest the supply-demand downward spiral, avoid the output loss, and make sure that these are temporary. “Else, it can last longer.”

Terming Covid-19 outbreak as a global pandemic and affecting almost all countries and the entire global population, Parkash said it is a challenging situation, impacting adversely on the well-being of the people, and health of the economy.

“Many people are calling it the worst economic challenge since the second world war. The challenge needs to be managed well.”

He said Bangladesh has been fortunate that it got the time to respond to the crisis and opportunity to learn from the lessons in other countries, like Singapore, Japan, Korea, Hongkong and China.

He said Covid -19 is highly contagious, and the contagion curve needs to be flattened. The contagion effect needs to be stabilised like Japan, Singapore, Hongkong and lately in Korea.

Parkash said some of the main lessons from these countries are: surveillance, rapid testing, isolation, caring, and treatment–moderate for normal but aggressive treatment for seriously affected patients, which may need the hospitalisation, and use of ventilators.

Given the limited resources, he said the management becomes very important, hence the approach has to be to identify critical hotspots, based on either the number of patients or people susceptible as a large number who are coming from outside, and prepare medical facilities adequately.

The ADB country director suggested for closer monitoring, adequate testing facilities, preparing an isolation unit in affected upazilas and adequately providing them with facilities and medical care professionals will all help.

Identifying one key challenge as to have enough medical care professionals – doctors, nurses and other para-medical staff, Parkash said, “We need to encourage them and recognise them through incentives such as enhanced insurance cover for one-year, adequate protective gear equipment, safe work environment, rapid testing and other facilities.”

“It’s a battle that all are fighting and the medical professionals are the main saviours,” he said.

“So, we must protect them and keep their spirits high. Priority should be on health sector with a clear strategy to flatten the contagion curve. This could include providing direct support to health sector for procurement of PPEs, testing kits, safety aprons, and medications, and augmenting the health units where the patients are likely to be treated,” he added.

ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty.

Established in 1966, it is owned by 68 members—49 from the region.