Published in The Business Standard on Sunday 12 April 2020
Whatever the growth will be, it is very easy to say that the economy of the country and people with lower income are in pressure now
It would not be wise to comment about the World Bank report as the development agency has projected the growth using an econometric model and their own methodology, setting some assumptions.
It is a reality that the economy was not in line to achieve 8.2 percent growth following the government budgetary target for the current fiscal year before Covid-19 hit Bangladesh.
Despite the growth target of 12 percent, exports have declined. Import of capital machineries and raw material were facing negative growth. The economy was in pressure in terms of both aggregate demand (import) and supply (export) before the impact of the coronavirus.
The impact of coronavirus is embarrassing to various degrees for all sectors, particularly in manufacturing and more in the service sector.
There is no way to disagree with the proposition that the impact of Covid-19 would significantly dent the probability of economic growth.
However, the Economic Intelligence Unit projected a 4 percent economic growth for the current fiscal year. The World Bank dropped the projection to 3 percent. Whatever the growth will be, it is very easy to say that the economy of the country and people with lower income are in pressure now.
There should have been some fiscal and monetary measures to prevent poor people from the immediate shock of coronavirus.
The National Board of Revenue should reduce Advanced Income Tax and Value Added Tax to import essential goods.
Vulnerable people who are out of the social safety net programmes should come under government support.
About 10 million people are working as day labourers while another 27 million are self-employed. There is no work or income for these 37 million people currently.
Cash transfer for these people could help sustain their lives and to accelerate economic recovery.
Poor people would buy many things using cash, which would boost domestic demand and play a multiplier effect. It is essential to maintain a strong supply chain to grab the opportunity.
However, the economy was in pressure even before Covid-19. The shock absorption capacity of the country is very poor. The pressure has widened as the economic impacts of coronavirus have started materialising.
Professor Mustafizur Rahman is a distinguished fellow at the Centre for Policy Dialogue.