The World Bank's latest update in many ways confirmed what most people would have figured out by now: following the fallout of the Coronavirus pandemic, the country's economy, while proving its resilience, is also set to undergo a period of flux. The early hopes of a so-called 'V-shaped recovery', signifying an immediate bounce-back, were proved quite immature in the context of the massive hit to demand in particular, and the impact on jobs and overall poverty.
In particular, the level of support pledged to the cottage, micro, small and medium enterprises (CMSME) in the stimulus package announced by the government had failed to materialise in time to save many of them. As of September 30, banks had given out just Tk 5,883 crore, or 29.41 of per cent of the total stimulus fund of Tk 20,000 crore set aside for CMSMEs, according to data from the Bangladesh Bank. Therefore we welcome the government's call to the 6 state-owned banks this week to accelerate the rate of disbursement of these funds.
In its twice-a-year regional update , the World Bank maintained its GDP growth forecast for Bangladesh at 1.6 percent for the current fiscal (2020-21) and 3.4 percent (2021-22) for the next fiscal, assuming that the impact of the Covid-19 crisis would be a more prolonged one than the country's well-wishers would have hoped. That puts us in the bracket for what is described as a 'U'-shaped' as opposed to a V-shaped recovery: when a recession occurs and the economy does not immediately bounce back but tumbles along the bottom for a few quarters before fully recovering its mojo.
To be fair, Mercy Tembon, the World Bank's country director for Bangladesh, said the global economic downturn will impact Bangladesh's economy like all the economies in South Asia. The forecast is for South Asia to plunge into its worst-ever recession as the devastating impacts of the Covid-19 on the region's economies linger on, taking a disproportionate toll on informal workers and pushing millions of South Asians into extreme poverty.
In its latest update, the WB forecasts a sharper than expected economic slump across the region, with the region's GDP expected to contract by 7.7 per cent in 2020. Most of that is down to the severe downturn being experienced right now in neighbouring India, where the size of the economy means the region's numbers are heavily weighted in the direction it is leaning. In Bangladesh, the report says private consumption growth is likely to remain subdued with depressed wage income, while private investment is projected to remain 'anaemic' due to heightened uncertainty. A projected decline in remittance inflows however has not materialised. Indeed, remittances have reached record levels in 3 of the past four months. It has been the brightest spot in the economy in an otherwise dismal year.
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