Mid Term Assignment on

Socio-Economic Impacts of Covid-19 on Household

Consumption and Poverty: Evidence from Bangladesh
Course Title: Macroeconomics
Course Code: ALD 3601

Prepared by Supervised By
Farhan Tanvir, ID- B5180B016 S.M Khaled Hossain
BBA 5(A) Lecturer
Army Institute of Business
Administration, Savar

ARMY INSTITUTE OF BUSINESS ADMINISTRATION

(AIBA)

Date of Submission: 27 September, 2020

 Letter of Transmittal

Date- 27 September, 2020

S.M. Khaled Hossain
Lecturer
Army Institute of Business Administration
Subject: Assignment on “Socio-Economic Impacts of Covid-19 on Household Consumption and
Poverty: Evidence from Bangladesh Perspective”
Dear Sir,
Here is our report on “Socio-Economic Impacts of Covid-19 on Household Consumption and
Poverty: Evidence from Bangladesh Perspective” that you have assigned us to submit as a partial
requirement for the course –“Macroeconomics”. While preparing this report, we have taken help
from internet, books, class lectures and relevant sources.
Throughout the study we have tried with the best of our capacity to gather as much information
and relevant issues as possible and tried to follow the instructions as you have suggested. We tried
our best to make this report as much informative as possible. We hope that it will satisfy your
requirements and serve the purpose
We are grateful to you for your guidance and kind cooperation at every step of our effort on this
report. We would be grateful if you kindly take some time to go through the report and evaluate
our performance.

Sincerely Yours,
Farhan Tanvir, ID - B5180B016
Batch- BBA 5
Army Institute of Business Administration, Savar.
 Acknowledgement

We sincerely acknowledge our debt to our course advisor S.M Khaled Hossain, Lecturer, Army
Institute of Business Administration for his valuable counseling towards the improvement of the
report. Without his encouragement, this would have never been possible.
We are overwhelmed with gratitude to our course advisor as he helped us in terms of propulsion
and completing this term paper impeccably. The report is prepared only to meet academic
purpose not for any other reason.
 Table of Contents
Letter of Transmittal 2
Acknowledgement 3
Introductory Part Table of Contents 4
Executive Summary 5

Introduction 6
1.1 Rationale of the Study 6

1.2 Objectives of the study 6

Chapter-I 1.3 Limitations of the study 7

1.4 Methodology 7,8

Current scenario of Poverty & Socio-Economy for 9-13

COVID-19 in Bangladesh
Chapter-II

Recommendations 14
Chapter-III
Conclusion 15

References 16
 Executive Summary
The purpose of the study is to analyze the consequences of COVID-19 on Household Consumption
and Poverty in Bangladesh. We’ve used various graphs and charts to interpret findings. Being on
the dreaded path of the Covid-19 calamity, Bangladesh needs to thoroughly assess possible socio-
economic disruptions following a full-scale attack of the disease in pandemic form. Several families
and family members are facing a sheer struggle with their livelihoods and earnings as a poverty is
heading towards their lives. The reasons and impacts are discussed in detail along with the
recommendation to follow.
 Chapter I: Introduction

In Bangladesh, Covid-19 began as a health crisis but has been simultaneously unfolding a
grave socioeconomic crisis.

The population that falls in the low-income bracket are disproportionately affected by the
Covid-19 induced economic crisis. About 90% of the people in this country are involved in
the informal economy and are dependent on their daily or monthly wage, with very little
buffer of savings, assets, or social protection. They were among the first to lose income
and/or employment because of social-distancing and lockdown. Without necessary
support, this large section of the population are bound to fall in a dire situation.

Poor and vulnerable people are also the ones disproportionately exposed to the virus for
a variety of reasons. They are at the frontline of providing the essential services or they
have to go out to feed their families. They often live in conditions where social distancing
is not feasible, in overcrowded slums or small houses shared with the extended family.
Many of them have poor sanitation facilities. They are also likely to be less aware,
compared to their educated, wealthier counterpart, about how to mitigate the risks of
infection.

1.1 Rationale of the study

➢ From this study one can get the overview of Poverty faced by people in Bangladesh during
COVID-19 pandemic.
➢ Findings of this study can also help Bangladesh to develop her Socio-Economic.

1.2 OBJECTIVES OF THE STUDY

The broad objective of the study is to explore the trends in exporting some selective products.
Apart from this broad objective, there are some specific objectives such as:

• To analyze the socio-economic condition of some families of Bangladesh.

• To identify the future situation of our countries Household consumption.

• To compare the past and present of Bangladesh’s poverty and economy changes.
1.3 Limitations of the study

❖ Due to COVID-19 we faced difficulty to collect large amount of primary data.

❖ Shortage of time to collect primary data.
❖ Online information can be manipulated by the authors.
❖ Money was our one of the limitations for conducting primary data collection.

1.4 METHODOLOGY

Sources of Data
The stated data are collected from secondary sources though the internet, articles and books of
renowned authors.

Methods of Resource Collection

This study was undertaken in the course of the secondary research which includes support from
different dailies, books, journals, websites and other research papers.
All the data were collected from diverse secondary sources such as:
➢ Articles
➢ Various websites
➢ Other papers and presentations

All the works were done in the following way:

Data collection
from various
external sources

Providing Elimination and

Selection process

Data Selection and

Presentation Analyze process
Resource collection from various external sources
Data collection is the first step of my research work. It means bringing together or gathering
relevant data from various sources like books, journals, magazines, internet etc. And we have
collected them for doing my research work authentic and reliable to the audiences. For collecting
data, we have searched for the impacts of socio-economy for covid-19 in Bangladesh on internet,
journals, magazine etc. Then we studied website for further info. Following these steps, we have
collected data for my research work. We had to give a lot more time for collecting data. It was
quite tough to get resourceful data but finally we have done it successfully.

Elimination and selection process

Elimination and selection process refer to evaluation of unnecessary data in a systematic way. After
collecting my data, we did this task. We did this because it helped us to find those important and
top most relevant data for my work. At first, we went through those collected data and found
some data were useless for my research work. So, then we just cut those unnecessary data and
selected the useful data for forwarding to the next step of our research work.

Analyzing process
Analyzing process means break down into components in a systematic way. After the selection of
useful data, we moved to this step. We did it because it is a research work of mine so we studied
it a lot to examine all these government websites. And for doing it successful research work we
have to dive into the deep of those selected data. For that at first, we studied about all those data
very attentively in order to finding some new things, new ideas.

Representing them
Representing refers to delegate my analyzed data and findings in front of the audiences. After
analyzing those data’s our next step was representing them which were important for this paper.
We represented them for reaching our ideas and findings to the audiences. Here we tried to
present our findings in an organized and also in our own way so that when a person read this for
his/her purposes he/she can be known to new things of that topic which will help them in future.

Providing recommendation
Finally recommendation means express commendation or advisable words for the upcoming
generation. We provided our opinion on our research work so that it will be helpful for all those
future workers to forward to their own research of that topic or that related topic.
 CHAPTER II: CURRENT SCENARIO OF POVERTY & SOCIO-ECONOMY FOR COVID-
19 IN BANGLADESH
COVID-19 Impact on Bangladesh’s Poverty

Initial poverty impact of Covid-19 crisis has been more severe for the urban poor. All indicators of
vulnerability as noted above indicate that the urban poor has been more severely impacted by the
Covid-19 crisis. This is particularly an area of concern because social protection programs in
Bangladesh has mainly focused on the rural poor. The Covid-19 experience needs to be leveraged
to jump-start urban social protection programs in Bangladesh.

Emergence of a new poor class necessitates a rethinking of approaches to poverty: The most
dramatic, though not unexpected, finding of the survey is the rapid emergence of a class of ‘new
poor’ – informal sector occupations with income above the poverty line but within a band of
vulnerability that saw 77% of this vulnerable non-poor group falling below the poverty line income
due to the impact of the Covid-19 crisis. Beyond the immediate challenge of addressing the food
security needs, this finding has implications to the precarious economic underpinnings of the
informal sector, in which a vast majority of technically ‘non-poor’ households subsist.

Notwithstanding the prioritization of livelihood concerns, both rural and urban respondents have
also prioritized the risk of Covid-19 infection: Sixty percent of rural respondents and 50% of urban
respondents cited the infection risk as a priority concern. Clearly, such finding indicate that life or
livelihood is a false choice for the respondents. Poverty-impacted urban and rural households
emphasize the need for both food and cash support in nearly equal measure.

Large-scale social protection support has become critical to avert widespread food insecurity. In
the early stage of the poverty impact of Covid-19, households have relied on personal coping
mechanisms, but they have clearly signaled the limits to their staying capacity. Survey findings have
served to establish realistic and credible parameters to calculate a fiscal package to 29 support the
needs of the poor and the ‘new poor’. Using these parameters, we have calculated a realistic fiscal
package of BDT 4746.22 crore for a month’s support to 33 million poor and an additional package
of BDT 5338.72 crore for a month’s support to 36.9 million of ‘new poor’.

Last mile delivery challenges will be a critical issue for scaled-up social protection measures to
mitigate the poverty impact of Covid-19 crisis. For example, how to provide assistance to such a
large number of people within a short time efficiently and effectively will be a critical question.
Socio-Economic present situation in Bangladesh
Since 25 March, Prime Minister Hasina announced stimulus packages of Tk 95,619 ($11.3 billion),
which equate to 3.3. per cent of gross domestic product to tackle the fallout of the coronavirus
pandemic on the Bangladesh economy. The first stimulus package will provide immediate working
capital for the export-orientated sector, namely the ready-made garment (RMG) industry as well
as small and medium enterprises. Prime Minister Hasina stated the stimulus packages were for all
people, ranging from industrialists, small traders, day laborers to rickshaw pullers, and that it
would increase public expenditure, widen social safety net coverage and increase the money
supply through monetary policy easing. One of the important features of the stimulus package is
that the lion’s share (Tk. 77,750) will be in the form of repayable loans and not grants (or
handouts). In line with the instructions issued by Bangladesh Bank, Bangladesh’s central bank, the
government will allocate full responsibility of fund distribution and management of 18 stimulus
packages to commercial banks. Interest free loans for large, medium and small businesses in the
industrial, service and farm sectors will carry a 2 per cent service charge and a two-year repayment
period, including a six months grace period. Although the stimulus package is a timely and much
needed measure, of the total workforce 85 per cent operate in the informal labor sector, leading
a hand-to-mouth existence. Due to the lockdown, they have completely lost their incomes and
have no access to money whatsoever. How effectively the relief money will be mobilized and used
will only be known in due course.

Fig: Per capita income of Bangladesh in 2020

In addition, the government has committed to expand the food security of marginalized and low-
income people that include the informal sector, old people and destitute women through
Vulnerable Group Feeding and Vulnerable Group Development programs. According to recent
estimates of the Bangladesh Bureau of Statistics (BBS), 20.5 percent of the population, or
approximately 34 million people are poor. According to Dr Selim Raihan, executive director of the
South Asian Network on Economic Modelling (SANEM), “During the ongoing crisis, one of the
major challenges is ensuring food security for this huge population”. SANEM estimates that there
are another 36 million people that are above the BBS’s official poverty line income who are ‘non-
poor’, but can be categorized as a vulnerable population. With the income shock that is taking
place at present, it is highly likely that a significant proportion of this vulnerable population will fall
into abject poverty. The immediate task of the government is to ensure all allocated relief aid
reaches the right people at the right time. To date, there is no clear indication as to the quantity
of resources that are actually available, the duration of these activities and programs, and whether
they will be transparent and free from political influence.

A recent United Nations report stated that the social protection initiatives undertaken by the
Bangladesh government have been limited in scope. To add insult to injury, numerous media
reports have exposed the involvement of ruling party members and their affiliates with
irregularities in distributing relief materials meant for the poor. This is highly problematic given
that destitute people are now roaming Dhaka begging for food, which will only get worse as the
days go by. The government will provide cash support of Tk. 2,000 ($24) per month to each of the
50,000 urban families, mainly informal workers such as manual laborers, construction workers,
rickshaw pullers and street vendors who have been severely affected by the nationwide lockdown.
Furthermore, the government is planning to provide food assistance to 12.5 million families under
various programs. Economists and researchers at the Centre for Policy Dialogue have stated that
the current stimulus package for the country’s poor is not sufficient to feed the huge vulnerable
population during the ongoing lockdown. If the vulnerable population is to survive through and
beyond the current pandemic, then funds and resources from the upcoming budget for FY 2021
will need to be allocated.

Even before the Coronavirus lockdown, Bangladesh’s export earnings were expected to decline
due to a global demand deficiency from its key export markets. Export earnings over the first eight
months of FY 2020 were already said to be negative (-4.8 percent) compared to the corresponding
period of FY 2019. The country’s flagship export sector, the RMG, was even said to generate
negative growth figures of -5.5 per cent compared to the corresponding period last year. At
present, many exporters are experiencing delays in the shipment of products while others are
seeing orders being deferred. Major brands based in Europe and North America are sending
cautionary signs of possible order cancellation due to economic slowdown of importing countries
and ongoing lockdowns. According to the Bangladesh Garments Manufacturers and Export
Association (BGMEA), Primark, Matalan and the Edinburgh Woollen Mill have collectively
cancelled £1.4 billion of orders and have suspended an additional £1 billion worth. These include
approximately £1.3 billion of orders already completed or were in production. Other brands such
as Tesco, Marks & Spencer and Next have stated they will honor existing orders. In a recently
published research report, it is claimed that western brands have invoked force majeure, since the
Coronavirus crisis is an extraordinary event which is beyond the control of the contracting parties,
and thereby relieving these parties from contractual obligations and liability.

The immediate impact of the widespread cancellation of orders has been catastrophic for the RMG
industry and its 4.1 million workers. Layoffs may not have resulted immediately because of the
government’s assistance package aimed at covering wage payments, but many workers have been
furloughed without pay. Early on, there was confusion whether RMG factories remained open or
were closed. Even as late as 21 March, Minister for Labour, Begum Monnujan Sufian, declared
that RMG factories would continue to operate unless the government took the decision to close
them, ignoring warnings from unions about the risk to garment workers. On 3 April, factory owners
announced they would open their factories, and thousands of garment workers returned to Dhaka,
only to find their factories closed because the owners changed their decision following widespread
criticism. The government decided to close all the factories on 14 April which it extended to 25
April. As of April 27, according to industrial police officials, around 1,427 out of 7,602 export-
orientated factories reopened on a limited scale. It was just a matter of time before the largest
forex-earning sector which exported $40.5 billion, or 84.21 per cent of Bangladesh’s total exports
for FY 2018-19, was reopened for business. As of 11 May, at least 58 workers from 38 garment
units on the outskirts of Dhaka and in Chittagong have tested positive for Covid-19. Minister of
Health and Family Welfare, Zahid Maleque stated that factories will be shut if they do not maintain
strict health and safety rules, which would make an already fragile situation worse.

Poverty Increase in Bangladesh due to Covid-19

The average income in the slums of Bangladeshi cities and among the rural poor has dropped by
more than 80% since the outbreak of the novel coronavirus, according to a survey report released
on Friday.

"A total of 63 per cent of such population, including day laborers, bhangari [plastic] workers,
restaurant workers, maids, transport workers, agriculture laborers, construction and factory
workers, petty businessmen, shop assistants and rickshaw pullers became economically inactive
during the time," said the survey findings.
The survey was jointly conducted by two independent local research centers -- the Power and
Participation Research Center and BRAC Institute of Governance and Development -- and included
5,471 households in urban slums and rural areas earlier in April.

Currently, over 3,300 slums in the capital Dhaka house around 646,000 people, mostly comprising
of poor day laborers and rickshaw drivers, while more than 70% of the country's 165 million people
live in rural areas. Of the total population, 20% live under the poverty line, according to
government data.

The survey said that some 40% of the poor population and 35% of the vulnerable non-poor have
already reduced their food consumption to cope with the situation amid the pandemic.

It added that per capita income in the slums had dropped by 82% to 27 Bangladeshi takas ($0.32)
during the survey week from 108 takas ($1.30) in February, while per-capita income among the
rural poor declined by 79% to 33 takas ($0.39) from 89 takas ($1.05).

Fig: Per Capita Income of Bangladesh in 2020

Household Consumption Situation due to Pandemic

Across the board, households had seen a 29% decline in income due to Covid-19, and the largest
drop in income was noted in Dhaka Metro area at 34%. 6% of all households had lost their full
income within the first ten days of government lockdown and 50% of households had lost at least
one-third of their income due to the Covid-19 crisis. Public transport workers were the worst
affected among the major professions, having lost more than half of their income since the Covid
lockdown. 42% of respondents indicated that Covid-19 had not impacted their incomes at the time
of study and none had indicated an increase in their household income since the Covid lockdown.

Prior to the Covid-19 lockdown, 11% of households were found to save on a regular basis, while
38% of households had sent remittances to their home districts. 19% of respondents had loan
repayment obligations. Out of an average BDT 17,273 spending per household, food and rent
made up the largest spending categories. Residential service workers (including domestic help and
caretakers) and Industrial and Technical workers were the least regular savers but at the same
time they had to remit a significant portion of their income, making the extended families of these
two professions in rural areas particularly vulnerable to financial shocks emanating from Covid-19.

Large fluctuations were seen in the pattern in food spending (the largest of spending categories),
where 40% of households had reported an increase in food spending after Covid-19, attributed to
inflated food prices and 32% other households who had reported lower expenditure of food which
was a conscious decision arising from the consequences of reduced household income. Healthcare
spending, at the time of survey, had not varied significantly due to effects from Covid-19.
Transport and education expenses had, on the other hand, seen a massive drop due to the effects
of Covid-19 lockdown.
 CHAPTER III: RECOMMENDATIONS & CONCLUSION
Recommendation

The enhanced stimulus package announced by the prime minister is commendable and step in the
right direction. The package which has nearly $2.5 billion allocation for bridge financing of the
working capital of small and medium sized industries is a bold step to protect the livelihood of
people employed in that sector. Such is the scale of this crisis, even a stimulus package of this
magnitude should be viewed as a stopgap measure.

More worryingly still, data from the Bangladesh Bureau of Statistics indicates that Bangladesh has
more than 50 million workers in the informal sector. While there will be a significant impact on
the livelihood of workers in the formal economy, there can be no doubt that the informal sector
will be hit even harder. The prime minister was right to identify this as a challenge and her decision
to distribute food aid through Bangladesh’s existing social safety programs such as the Vulnerable
Group Feeding and Vulnerable Group Development for six months must also be welcomed.

The government should also consider an unconditional cash transfer program for an initial period
of three months at a rate of $95 per month, which corresponds to the minimum wage for the
formal sector in Bangladesh. This would cost the government roughly $14 billion, or 4% of GDP.
While this sort of cash transfer program always suffers from targeting issues, Bangladesh enjoys a
highly sophisticated mobile financial services network, which could improve the cover of the
program. A concerted effort involving the non-governmental organizations working in the informal
sector, mobile financial service providers, and the government could be developed to deliver this
urgently needed social assistance.

Taking such an aggressive step would mean that Bangladesh would have to forego its usually
prudent and disciplined fiscal policy of maintain its budget deficit within 5% of GDP. With a low
debt-to-GDP ratio, Bangladesh has enough fiscal headroom to adapt an expansionary approach in
the short run to fight off the economic and humanitarian aspect of this crisis. To finance this
expansion, Bangladesh should also look to tap into the concessionary financing available at its
disposal through the multilateral development banks.
 Conclusion
To conclude, although the Bangladeshi government has taken some serious measures to contain
the spread of Covid-19, its response to the threat has been inadequate. Between February and
March, a huge number of people entered Bangladesh from countries worst affected by Covid-19.
This demonstrated that the country was not fully ready to tackle an impending epidemic.
Bangladesh should have learnt from the success of Hong Kong, South Korea, Singapore and Taiwan
in managing the crisis through widespread testing, raising awareness, contact-tracing, self-
isolation, and early-phase treatment. The government should have also adopted a strategy
centred on carrying out significant testing of suspected patients and isolate or quarantine those
they had contact with to prevent further transmission of the virus. Not least due to these failures,
there is now a significant risk that the uncontrolled spread of Covid-19 will overwhelm the severely
underfunded and under-resourced health system, since even wealthy developed countries in
Europe and North America have struggled to cope. Without a vaccine, good hygiene practices and
physical distancing are the only viable means of reducing the threat and impact of the disease. In
the coming months, Bangladesh has no room for failure, especially as it has neither the economic
means nor the public health resources to protect its population, including its most vulnerable
groups and those who are at greatest risk. If there is one thing that the pandemic has highlighted,
it is that there remain numerous complexities and challenges when it comes to containing
infectious diseases in large and under-resourced populations.
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