Professional Documents
Culture Documents
ON
Impacts of COVIT-19 on Global Economy
(under the course of MPA-503)
Submitted by
Md.Monzur Ahmed
Student of MPA(10th Batch)
ID-20011042
Dept of Accounting Information System
University of Dhaka
Submitted to
Dr.Md.Sharif Hossain
Professor
Dept of Accounting Information System
University of Dhaka
Executive Summary
Bangladesh as a country has a long traditional experience to face
disasters or major humanitarian crises. The country has been fighting a
longstanding battle against the impact of climate change & currently
hosts the world’s largest refugee camp along its southern border. As
an independent country Bangladesh now 49 years old, within such
period- peoples of the country have shown tremendous resilience in
fending off not only natural disasters such as floods & cyclones but
also manmade ones, like the 1997 Asian financial crisis & 2008 global
financial crisis.
The COVID-19 pandemic, however, is a crisis of a completely different
magnitude & one that will require a response of unprecedented scale.
The response so far is admirable, yet this pandemic also poses an
economic & humanitarian crisis. While many countries made good
starts in stimulus packages, but Bangladesh has been slower to react.
The prime minister initially announced an emergency stimulus
package of $600 million (equivalent to 0.2% of GDP) on 25 March,
which on 4 April was enhanced significantly to $8.5 billion (equivalent
to 2.5% of GDP) in order to face the said pandemic situation by
economically in future.
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 & vulnerable group development for six
months must also be welcomed.
INTRODUCTION
The global health crisis caused by COVID-19 has hit Bangladesh’s
economy hard & jeopardized the country’s impressive achievements in
poverty reduction. Against this backdrop Dhaka is set to announce its
annual budget. It now appears that Bangladesh is facing a major
economic crisis in the making caused by the COVID-19 pandemic. After
a brief reopening of the economy, the country now has reverted to
‘hard’ lockdowns in various places to deal with the COVID-19 pandemic
amid demands from certain sections of the population to do so.
But lockdowns are not sustainable for the time that will be required to
develop a vaccine. Also, lockdowns are not feasible for a country like
Bangladesh if people cannot be provided with in the basic necessities of
life. More importantly, it would bring the economy having crippling
effects on all sectors of the economy thus threatening millions of
livelihoods in Bangladesh.
While the government is striving to contain the virus, emphasis should
be directed more to augment immunity. Given the resource availability
& a week & inadequate healthcare systems to deal with the pandemic,
Bangladesh may default into building up some kind of ‘herd immunity’ ,
so more people become immune to the virus enabling the country to
begin to open up.
Literature Reviewed
The first case of COVID-19 (Coronavirus) was reported in Wuhan, China, in late December 2019.
As of 31 May, 2020, over 6.2 million COVID cases were reported in over 200 countries and
territories around the world. Until that date, the virus killed over 3,71,000 people worldwide,
with the highest number of deaths – over 1,05,000 – being reported in the United States.
The COVID-19 pandemic is causing an unprecedented disruption to the global economy. The
resultant socio-economic impact is being transmitted through different channels. The
International Monetary Fund (IMF) warned that the pandemic might push the global economy
into the worst recession since the Great Depression of the 1930s, and far worse than the one
triggered by the Global Financial Crisis in 2008-09, with the poorest countries being the hardest
hit. As per IMF projections, the global economy would contract by 3.0 per cent in 2020, while
the World Bank thinks the global economy will decline by 2.1-3.9 per cent. Using simulations
from a general equilibrium modelling exercise, the Asian Development Bank (ADB) derives that
the global economy could lose between $5.8 trillion and $8.8 trillion – equivalent to 6.4 per
cent to 9.7 per cent of the global gross domestic product (GDP).
Global trade contracted by 3.0 per cent in the first quarter of 2020. According to the UNCTAD,
the downturn would accelerate in the second quarter and so the world trade would decline by
27 per cent. This is echoed by the World Trade Organization (WTO), which has projected that
the world merchandise trade would shrink between 13 and 32 per cent in 2020.
The COVID-19 pandemic is expected to cause huge job losses for migrant workers and thus
affect remittance flows. According to the Institute for Public Policy Research, migrant workers
are particularly likely to work in accommodation and food services, one of the most affected
sectors in the COVID crisis. The World Bank projections found that global remittance flows
would decline sharply by 20 per cent in 2020. Europe and Central Asia will experience the
largest fall of 27.5 per cent, followed by Sub-Saharan Africa (23.1 per cent), South Asia (22.1 per
cent), the Middle East and North Africa (19.6 per cent), Latin America and the Caribbean (19.3
per cent), and East Asia and the Pacific (13 per cent).
Worldwide FDI flow is expected to drop by about 35 per cent due to travel bans, disruption of
international trade, and wealth effects of declines in the stock prices of multinational
companies.
About 94 per cent of the world’s employed workforce are living in countries with some sort of
workplace closure measures in place while around one-fifth of them live in countries that have
closed all workplaces apart from those deemed essential. The decline in working hours around
the world in the first quarter of 2020 is equivalent to approximately 135 million full-time jobs
losses, which would increase to 305 million in the second quarter. The crisis is hitting young
workforce, especially young women, more severely than any other group. The International
Labour Organization (ILO) survey found that more than one in six young people have stopped
working since the onset of the crisis. Young people who remain employed experienced a 23 per
cent cut in their working hours.
The COVID-19 pandemic is likely to cause an increase in global poverty for the first time since
the 1990s. According to a UNU-WIDER estimate, the number of people living in poverty could
increase by 420–580 million. The World Bank estimates that the share of the population living
in extreme poverty (incomesless than $1.90 per day) will rise by 40-60 million. The United
Nations, however, put the number in the range of 84–132 million. According to the Save the
Children and UNICEF, the COVID-19 pandemic could push an additional 86 million children into
household poverty by the end of 2020.
The world could see the number of hungry people double in the aftermath of this crisis, as per
the World Food Porgramme (WFP). As per the Global Report on Food Crises, there were 135
million people in acute food insecurity in low and middle-income countries last year. That figure
could almost double to reach 265 million in 2020.
Prices of primary commodities plummeted in the first quarter of 2020. UNCTAD's free market
commodity price index (FMCPI), which measures the price movements of primary commodities
exported by developing economies, declined by a whopping 20 per cent in March. This is the
highest fall in commodity prices in recent history with the comparable figure during the global
financial crisis of 2008 when it was around 18 per cent. Quite strikingly, the prices of crude oil
became negative in April, which however recovered in May.
Data Collection & Basic Statistics
Which sectors has been jeopardized of our economy explained as below:
The previous structural weakness coupled with pandemic shock has driven
the textile industry into a corner and has created a ‘’do or die ‘situation.
The government stimulus gives the industry access to cheap financing
which is not enough to address the demand and supply chain distributions
over the long run.
The covid-19 pandemic has completely derailed the textile industry from its
growth trajectory. From Mar’2020 to May’2020, RMG exports fell by
54.80% to USD 3.7 bn from USD8.2bn over the saner period of 2019.During
this time.1150 factories reported order cancellation/suspension of
USD3.18bn which impacted around 2.28mn workers in the industry.
The pharmaceuticals industry is among the latest effected by the pandemic
disruption but the industry’s supply chain has been stretched dangerously
thin. The industry imports over 97% of its raw materials; however, trade
with importing countries has been severely restricted since the starts of the
pandemic. If this persists, drug producers may have to shift to expensive
import destinations which will eat into their profit margins.
Bangladesh has excess power generation capacity that results in growing
capacity payments every year. Over all power capacity utilization in -
Bangladesh for 2018-19 was just 43% , while capacity payments to idle
plants reached BDT 89.3bn in 2018-19.Now the pandemic driven slowdown
in economic activities is likely to further lower energy demand and worsen
the excess capacity situation. Many of the power generation & distribution
companies likely to witness significantly fall in their topline even with
capacity payments, some will face business continuity risk from non-
renewal of rental power agreements.
High cost to income ratio (78%) in the banking sector with a sudden
pandemic shock made the banks ripe for cost efficiency developments/
Cost rationalizations & layoffs in banking sector may come up with an
endeavor to increase efficiency but if done in biased/weak governance
framework, it may leave the sector demoralized.
Global & local demand for manufactured goods, particularly in the
garments sector, will affect private sector growth & government’s focus in
managing the COVID-19 pandemic in expected halt public private sector
projects. Hence, based on the economic disruptions following the
pandemic, GDP growth forecast of Bangladesh by IMF, WB and ADB has
been revised downward from 7.8% -8.2% to a range of 2.0% to 3.8% for
FY’20. We project export to fall by 15.4%, import to slow down by 11.8%
and remittance to grow at 6.0% in FY’20.
Fiscal stimulus worth BDT 1,029.60bn and various non fiscal stimulus has
been announced to tackle the economic fallout of the corona virus
pandemic. However, efficient implementation of the fiscal stimulus will be
a key challenge.
Bangladesh’s foreign exchange earnings are poised to drop. Foreign
remittances projected to fall by 22 percent, from $18.32 billion in 2019 to
$14 billion in 2020.
According to the Bangladesh Bureau of Statistics (BBS), 20.5 per
cent of the population live below the poverty line that is about 34
million people and 85.1 per cent of work force are employed in
the informal sector, that is about more than 50 million people.
Most of these workers in the informal sector are also
underemployed. Now the pandemic has further worsened their
employment prospects. It is now estimated that the pandemic has
rendered 80 per cent workers unemployed in the informal sector.
Only 6 million people are employed in the formal sector, largely in
manufacturing.
Over the last decade, the economy has been growing at around 7
per cent per annum, yet 20 per cent of the population earn less
than US$5.00 a day, 9.2 per cent of employed in the country earn
less than US$1.90 a day and only 15 per cent of Bangladeshi
workers earn over US$6.00 a day. This is the pre-pandemic
employment and wages situation in the country. Now the
situation has worsened significantly.
Nearly 10 million Bangladeshis are working in foreign countries,
mostly in the Gulf countries. Now the depressed oil prices
affecting the Gulf states and lockdowns imposed in Europe since
April are already causing serious economic slowdown in these
countries having a negative impact on expatriate Bangladeshi
workers abroad.
Table 2. Multiple linear regression models for selected statements using perceptions as
independent variables (n = 1,066).
The Affected Psychosocial Wellbeing and Socio-Economic Fear of COVID-19 and the
Government's Decision to Lockdown
The results of linear regression showed that among the 45 variables, only 10 variables showed
statistically significant associations with fear of the COVID-19 outbreak (Table 2). For instance,
mental health variables MH2, MH3, and MH4 statistically pose a significant positive effect on
fear of the COVID-19 outbreak (p < 0.01). On the other hand, there is a statistically positive
association between fear of the COVID-19 outbreak (p < 0.05)and the healthcare system in
Bangladesh (HSB1 and HSB8), due to the lack of testing facilities and a fragile healthcare system
contributing to the fear that has been experienced due to the COVID-19 pandemic in
Bangladesh. The socioeconomic issues (SEI 10) and immediate emerging issues (IEI2) have a
statistically significant positive impact (p < 0.01), e.g., obstruction to the formal education
system, and the potentiality of a huge number of people becoming infected may contribute to
the fear development of the COVID-19 outbreak in this country. There was also a positive
significant association between the chance of community transmission of COVID-19 for
immediate emerging issues (IEI1) with fear of the COVID-19 outbreak (p < 0.05).
Results from the regression analysis further showed eight variables have a significant statistical
association with the governance and political capacity to deal with the COVID-19 outbreak in
Bangladesh (GPI1). A significant positive association was found among the governance and
political issues (GPI1 with GPI2 and GPI3) and socioeconomic issues (SEI2) (p < 0.01), implying
that the government's decision to lockdown activities was at the proper time and has enhanced
the people's perception of the capacity of Government to deal with the COVID-19 outbreak
(Table 2).
The Potential Arising of Social Conflicts From COVID-19 and Governance and Political
Association
However, the negative association between governance and political issues (GPI1) and the
healthcare system of Bangladesh (HSB9) (p < 0.01) shows that a perceived lack of budget
created a gap in the response to COVID-19 (Table 2). Moreover, a negative association of
governance and political issues (GPI1) with the healthcare system of Bangladesh (HSB4) and
socioeconomic issues (SEI3) (p < 0.05) shows a perceived lack of trained doctors and healthcare
professionals, and that a hampering of formal and informal business activities are reducing the
government's capacity to deal with the COVID-19 outbreak. Nevertheless, a positive association
of governance and political issues GPI1 with socioeconomic issues SEI11 (p < 0.05) and
governance and political issues GPI7 (p < 0.01) shows that there is a perceived possibility of
social conflict due to this outbreak if not managed properly, and that the Bangladesh
Government will need support from developed nations and allied forces to deal with this
outbreak. It should be mentioned here that containment, risk mitigation, and suppression plans
must be as inclusive as possible or risk undermining response efforts.
The Potential Socioeconomic Crisis of the COVID-19 Outbreak and the Suffering Poor
Communities
The regression analysis showed that, among the 45 variables, nine showed a significant
statistical association with the future impacts of implementing lockdown and social-distancing
activities (SEI2). A significant positive association of socioeconomic issues (SEI2) with
governance and political issues (GPI1) and socioeconomic issues (SEI3) (p < 0.01) shows that the
Government took the right decision by shutting down regular activities and implementing the
social distancing approach (Table 2). But due to this initiative, the formal and informal business
sectors and the economy will be hampered. Again, a positive association of socioeconomic
issues (SEI2) with mental health (MH3) and healthcare services (HSB5) (p < 0.05) reveals that
this decision of shutting down normal activities was imposed due to the fear of losing lives due
to COVID-19 and having a lack of healthcare facilities. However, a positive association of
socioeconomic issues SEI2 with SEI4, SEI8, SEI10, and enduring emerging issues EEI6 (p < 0.05)
shows that due to this shut down poor people will be severely affected, the price of the basic
products will increase, the formal education system will be hampered, and the possibility of
severe socio-economic and health crises will increase.
Other Infectious Disease Risk Management During COVID-19 Outbreak
In the regression analysis, eight variables are statistically associated with the possibility of
community transmission of COVID-19 (IEI1). A significant positive association between mental
health variables (MH1, MH3), healthcare system variables (HSB1, HSB7), Socioeconomic
variables (SEI6, SEI11), and immediate emerging issues (IEI2, IEI3) (p < 0.01) reveals that
community transmission will increase the number of infected people which will create further
fear and mental pressure of others of losing their lives due to COVID-19 infection (Table 2). The
fragile healthcare system of Bangladesh will be unable to detect most of the infected patients
due to a lack of health facilities, which leads to undermining the actual infected cases. As of the
last day of the survey for this study on 30 March 2020, the testing rate of COVID-19 was at its
lowest in Bangladesh compared to the other similar countries (10 people/ 1 million). However,
as the laboratories increased, the number of testing has increased along with this, with 878
people/1 million. This is still inadequate compared to the population density. Also, the
inadequate disposal method of COVID-19 hospital bio-medical waste management and
associated facilities could increase community transmission. Subsequently, due to the
community transmission of COVID-19, many people will lose their lives and livelihoods, which
might lead to creating social conflict, as a worst-case scenario.
Combating Environmental and Climate-Induced Natural Disaster Risks During the COVID-19
Outbreak
The regression analysis further identified nine variables that are significantly associated with
the possibility of climate-induced extreme natural events (flood, cyclone, landslides, etc.)
occurring during/after the COVID-19 pandemic. The pandemic along with natural disasters may
create a double burden to the country due to enduring emerging issues (EEI2). The positive
association between EEI2, SEI9, IEI5, EEI1, EEI3, and EEI4 (p < 0.01) shows that there is a
perceived possibility of a climate-change-induced disaster after the COVID-19 situation which
would create severe food insecurity (Table 2). Poor people will suffer most from food and
nutritional deficiency and the country will face enormous economic loss. Also, after the COVID-
19 situation, a lack of bio-medical and solid waste management will add more problems.
Moreover, a positive association between EEI2, HSB2, and EEI6 reveals that, after the COVID-19
emergency, existing poverty will create further socio-economic and health crises.
Overall Relationship Assessment Among the Variables From CTT, PCA, and CA
CTT and PCA revealed a confidence level of controlling factors in Bangladesh during the COVID-
19 outbreak and how these components are correlated to the psychosocial, socio-economic,
and environmental crisis components (Tables 1, 3). Cluster analysis (CA) further detected the
total status of regional variations, and how socio-economic and environmental crises influences
psychosocial development (Figure 3).
TABLE 3
Table 3. Varimax rotated principal components.
Results From CTT and PCA
From the CTT analysis, according to the corrected inter-item correlation analysis, among 46
variables, four variables have low corrected item-total correlations (i.e., the ability of the
government to deal the outbreak, −0.054; seriousness of the government, −0.011; government
is taking a proper decision, −0.078; and other sectoral involvement to COVID-19, −0.04). The
remaining 42 variables in the scale had an acceptable corrected item-total correlation (0.257 to
0.602) and the Cronbach's alpha (0.896) was acceptable.
From PCA, nine principal components (PCs) were originally based on standard eigenvalues
(surpassed 1) that extracted 55.28% of the total variance as displayed in Table 3. The scree plot
was adopted to detect the number of PCs to be retained to provide insight into the underlying
variable internal structure (Figure 2). The loading scores were demarcated into three groups of
weak (0.50–0.30), moderate (0.75–0.50), and strong (>0.75) (18–20).
FIGURE 2
Reference
Dr M Abu Eusuf is Professor at the Department of Development Studies,
University of Dhaka, & Executive Director, Research and Policy Integration
for Development (RAPID). Jillur Rahman is Lecturer at the Department of
Economics, Jagannath University.
Dr Fahmida Khatun, Executive Director, Centre for Policy Dialogue (CPD);
Professor Mustafizur Rahman, Distinguished Fellow, CPD;
Dr Khondaker Golam Moazzem, Research Director, CPD; and Towfiqul Islam
Khan, Senior Research Fellow, CPD.
avra@cpd.org.bd; www.cpd.org.bd
[The article is based on CPD IRBD 2020 (fifth periodic review of FY20).
Research support was received from CPD IRBD team members including Md
Zafar Sadique, Mostafa Amir Sabbih, Muntaseer Kamal, Md. Al-Hasan, Syed
Yusuf Saadat, Abu Saleh Md. Shamim Alam Shibly, Nawshin Nawar, Tamim
Ahmed, Md Jahurul Islam, Iqra Labiba Qamari, Fariha Islam Munia and
Taslima Taznur]
M ABU EUSUF and JILLUR RAHMAN | Published: June 02, 2020 13:38:51 |
Updated: June 09, 2020 12:02:52
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