Originally posted in The Daily Star on 1 November 2021
While more than seven billion doses of Covid-19 vaccines have been administered around the world—albeit almost 70 percent in developed countries and only two percent in low-income countries—the global economy is expected to see a strong recovery in 2021. The growth projections by international organisations indicate a ray of hope with some of the major economic parameters showing positive signs. For example, the International Monetary Fund (IMF), in October 2021, projected that the global economy would grow by 5.9 percent in 2021 and 4.9 percent in 2022, compared to a negative (-) 3.1 percent growth in 2020. The World Bank in June 2021 estimated that the global economy would increase by 5.6 percent in 2021. The United Nations Conference on Trade and Development (UNCTAD), in October 2021, saw the world output growing by 5.3 percent in 2021, as opposed to a negative (-) 3.5 percent growth in 2020. Of course, the uncertainty cannot be overruled since we are still dealing with the pandemic, and its forms and spread are beyond human control. Therefore, such prospects are subject to the level of risks of the pandemic and the management of financial situations in the developing countries, which are struggling more than the developed countries. It is also projected that going back to the pre-pandemic economic situation will take several years.
Moreover, this growth is going to be uneven across regions and countries, and among sectors of the economy. There will be unbalanced growth within the countries themselves as well. This is already happening as large businesses have managed to recover to some extent and are showing promising signs of growth, while the smaller ones are struggling. Therefore, it was indicated by some international organisations and experts that the recovery from the pandemic would be K-shaped. In fact, the unbalanced growth pattern already existed during the pre-Covid period. While developed countries progressed smoothly and significantly, developing and least developed countries continued to fall behind with limited finance, low technological absorption and weak capacity. In the same tune, as the rich accumulated income and wealth, the gap between the rich and the poor grew further at the country level too. Therefore, as the attempt towards economic recovery is now ongoing, the expectation is that the world will see a better outcome of economic growth, which will be inclusive and equitable. There has been a lot of rhetoric on building forward a resilient global economy. But what would it really take to recover from the economic shrinkage due to the pandemic? We want to recover the losses and restore growth momentum. But the pattern, type and nature of that growth should be different from the pre-pandemic period, and be new and progressive. I would like to focus on four areas for such a recovery. These should in fact be the preconditions for the post-Covid growth narratives in all countries, particularly those with limited resources capacity.
First, the healthcare system should be made robust by large investments in both physical and soft health infrastructures. We must remember that we are not yet in the post-Covid phase. The pandemic is very much prevalent; there is a huge uncertainty as to when it will leave us, or if it will go away at all. Of course, the majority of the population in developed countries are vaccinated and are probably in less risky situations. But the people in developing and poor countries are still in danger of the pandemic. So, the immediate requirement is ensuring vaccination for all in those countries that are left behind. All eligible citizens of all countries should be fully vaccinated and defeat the virus. This requires commitments and policy actions at the global level, so that vaccines are accessible to the people of the poor countries.
At the national levels, respective governments should also take appropriate policy measures for developing robust and efficient healthcare systems which are able to handle critical health crises, such as the pandemic. Such a health system must also be affordable by all citizens, so that they can pay for doctors, nurses and medicines. Higher investment is required, not only for more hospitals, intensive care units, doctors, nurses and health service providers, but also for universal health insurance, so that healthcare services are affordable to the common citizens. This is not only applicable for Bangladesh, but also for many developing countries.
Second, many governments will have to maintain an accommodative monetary policy to support the businesses for some time. During the pandemic, there was a need for expansionary monetary policies as governments across the world announced stimulus packages at various scales to support businesses and individuals. In Bangladesh, such support has helped many businesses and poor people to stay afloat. With economic activities being resumed and consumer demand going up, businesses—particularly the larger ones—have managed to make a comeback. However, the cottage, micro, small and medium enterprises (CMSMEs) have faced the toughest challenge, as they have had little access to finance despite the stimulus packages in place. Due to the informal nature of the CMSMEs, the complicated formalities for bank loans, and lack of information on the stimulus packages, many suffered serious losses and closed down. These small businesses are sources of employment for many. As the economy aims for higher growth, these businesses will require liquidity support in the form of soft loans from commercial banks. Besides, there is also a need for direct cash support to the poor who could not receive money during the first phase of cash support. Though the economy has started to gear up, high inflationary pressure of commodities has become a concern for the common people, including the poor who are the hardest hit.
Third, higher investment on green projects should be made for future growth to be environmentally sustainable. Investments are essential for job creation. But it is critical to monitor how those investments are made. Infrastructural investments by destroying forests, biodiversity and ecosystem, and burning fossil fuels may add to the gross domestic product (GDP) of the country and create jobs, but the growth is of low quality and not sustainable. To fulfil Bangladesh’s commitment for reducing greenhouse gas (GHG) emission and to adapt to the climate-induced risks and disasters, technology is crucial. The private sector, which plays a key role in the economy through investment and employment generation, should take the lead to bring in clean technologies for green growth. Technology should also be coupled with capacity development of the people. For adaptation, public investment plays a vital role. However, developing countries do not have adequate resources for undertaking adaptation measures, which is expensive. This has to come from developed countries as well as the Global Climate Fund. Indeed, developed countries also have the responsibility for technology transfer to poor countries.
Fourth, the post-Covid growth should aim for increased participation of women in the labour force. As of 2020, labour force participation by women is 36.3 percent, according to the Bangladesh Bureau of Statistics (2018). However, 91.8 percent of the female workforce are in the informal sector and earn low income with high job insecurity. During any economic shock, the informal sector workers are the first ones to lose their jobs. Reports have also found that women have been more vulnerable to domestic violence during the pandemic. While designing measures for “building forward better” during the post-pandemic period, the focus should be to have women-friendly policies, so that they can take part in the labour market in larger numbers. Implementations of policies will require higher investment into girls’ education and training, and creating a safe environment for them.
Overall, the future growth has to focus on quality, rather than quantity. Inclusivity and sustainability aspects have to be brought to the forefront. Therefore, policies for and perspectives on economic growth have to be changed.
Dr Fahmida Khatun is executive director at the Centre for Policy Dialogue (CPD).