Contents

Chapter 01.............................................................................................................................................2
1.0 Introduction.................................................................................................................................2
1.1 Significance.................................................................................................................................2
1.2 Argumentation structure..............................................................................................................2
Chapter 02.............................................................................................................................................3
2.1 Impact of Covid-19......................................................................................................................3
2.1.1 Economic Growth.....................................................................................................................3
2.1.2 Unemployment.........................................................................................................................3
2.1.3 Inflation Rate............................................................................................................................3
2.2 Policy Implementation.....................................................................................................................4
2.2.1 Fiscal policy..............................................................................................................................4
2.2.2 Monetary policy........................................................................................................................4
Chapter 03 Conclusion..........................................................................................................................5
References.............................................................................................................................................6
Chapter 01
1.0 Introduction
The purpose of this paper is to analyze the long-term effects of Covid-19 on the Bangladeshi
economy. The paper's stated objective is to examine the impact of the pandemic on various
macroeconomic variables and to provide evidence for the rationale behind the government's
decision to enact stimulative fiscal and monetary policies.

1.1 Significance
Globally, the COVID-19 epidemic has resulted in substantial economic damage and heavy
casualties. There has been an increase in poverty, income inequality, and unemployment in
Bangladesh, as indicated by a number of separate studies. In fact, the effects of the pandemic
are shown to be greatest in already vulnerable populations. The epidemic has had a
cumulative effect on Bangladesh's macroeconomic and socioeconomic statistics, which the
country is still working to address. The liquidity problem has led to a dramatic increase in the
unemployment rate and the closure of many firms. People's ability to make a living has been
severely hampered.

Bangladesh's socioeconomic progress over the past decade was severely interrupted by the
pandemic shocks, and the country's progress toward the SDGs was also severely hampered.
Therefore, extreme poverty was reduced, health and education were improved, and the
gender gap was narrowed, but only marginally. Simultaneously, preexisting problems like
economic disparity and youth unemployment grew worse (CPD, 2020b).

Bangladesh's government has spent the past year and a half implementing humanitarian
programs, liquidity support, and fiscal stimulants in response to the country's pandemic-
induced vulnerabilities. There is no disputing, however, that the authorities are up against
significant obstacles in tackling the pandemic.

1.2 Argumentation structure

The rest of the article is structured as shown; chapter 2 examines the pandemic's impact and
effects in depth, while chapter 3 discusses the strategies instituted by the government to
counteract them. In the final chapter, conclusions and suggestions for further action are
presented.

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Chapter 02
2.1 Impact of Covid-19
The detrimental impact of Covid-19 was felt by nearly every country's economy. First-half
2020 global economic growth was badly impacted, and a 2020 global GDP growth prediction
of -4.9% was revised downward (Outlook, 2020). While the macroeconomic sector in
Bangladesh has shown signs of recovery following the pandemic-induced shock, the
country's socioeconomic shock may remain for a longer period of time.

2.1.1 Economic Growth

GDP growth in Bangladesh slowed but remained healthy in FY2020, and prospects look
brighter for FY2021. A number of factors have contributed to the more optimistic forecast,
including a revival in exports, a rise in remittances, and steady inflation. A projection taking
into account the effects of the pandemic is required because the GDP fell to 0.5% in 2020.
For FY2022, the government has projected a GDP growth rate of 7.2%. Despite government
assurances of a speedy return to pre-crisis levels of GDP growth, the social and economic
repercussions have manifested itself in rising rates of unemployment and poverty as well as
diminished access to and quality of health care and education, a widening gender gap, and a
heightened susceptibility to natural disasters.

2.1.2 Unemployment
Employment was significantly impacted by the pandemic due to reduced mobility, supply
chain disruption, decreased demand, tourist and business closures, etc. Cancellations of
orders in the RMG industry impacted around 2.25 million jobs (Opu, 2020b). Daily wage-
based farm and nonfarm employees are significantly affected by the lockdown and economic
crisis since they lack resources to live. BRAC's food security analysis found that farmers lost
$6.66 billion during the March–May lockdown (Welle, 2020). After the initial shock was
absorbed, employment began to rebound; however, this recovery has been accompanied by
income losses as people seeking work have shifted to lower-paying industries including
agriculture and the informal sector (Rahman, et al., 2020).

2.1.3 Inflation Rate

The annual inflation rate has been quite consistent for many years. Consumer spending fell
since people had less money to buy things. The consumer price index showed that the
annualized inflation rate was 5.59% in December 2019, with a margin of error of 0.15%. A
year from now, in November of 2020, the rate will have dropped back down to 5.52% from

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its peak of 6.02% in December 2019. The inflation rate is driven primarily by changes in the
cost of non-food products (BB, 2020a).

2.2 Policy Implementation

The health issue precipitated a transient disruption that calls for a proactive reaction in the
shape of extending economic assistance to both individuals and enterprises. The banking
system had the potential to function as a proficient channel for the mobilization of finances in
order to provide support to both individuals and enterprises. The imperative nature of the
partnership between the government and Bangladesh Bank was evident in their collective
efforts to effectively mitigate the economic repercussions experienced by the country.

2.2.1 Fiscal policy

As a means of providing economic support and mitigating potential long-term repercussions,
the government must undertake comprehensive fiscal measures. Businesses have received
government stimulus handouts. To reduce long-term effects, the government must adopt an
expansionary fiscal policy and provide subsidies to the economy. Cash transfers to
individuals and businesses, interest subsides, and tax cuts may speed economic recovery. The
SME sector needs special attention to recover from the pandemic and contribute to economic
development. Spending more on healthcare and education prevents future concerns. The
surprise reduction in oil prices may give the government a new instrument to fight inflation
and boost GDP.

The government had implemented expansionary fiscal policies, including modifications to

the income tax framework. The maximum taxable income for all taxpayers has been raised
from BDT 0.25 million to BDT 0.30 million. The threshold for senior persons and women
has been increased from BDT 0.30 million to BDT 0.35 million. It is noteworthy to
acknowledge that the government has granted exemptions from value-added tax (VAT) for
the manufacturing, importing, and retail selling of seventeen distinct categories of medical
equipment. Various items, including COVID-19 testing kits, soapy alcohol, and personal
protective equipment (PPE), have been referenced. VAT exemptions have been provided to
businesses operating within the agricultural industry that get their inputs and machinery
domestically.

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2.2.2 Monetary policy
The preservation of an inflation objective holds significance, alongside the imperative of
sustaining economic growth. In times of economic recession, enterprises may require access
to liquid assets, and the implementation of an expansionary monetary policy might serve as a
viable solution to address this demand. The primary principle of the strategy, which involves
a decrease in interest rates, has the potential to enhance investment, enhance conditions for
global trade, and create opportunities for economic expansion. When an influx of funds is
injected into the economy due to a favorable monetary shock, there is an increase in business
activity. Moreover, the efficacy of monetary policy in stimulating actual domestic production
in both the immediate and extended periods is guaranteed by a proficient transmission
mechanism. Policymakers have the potential to attain sustained and resilient economic
growth by exercising judicious control over monetary policy, which not only fosters
economic expansion but also cultivates a conducive business climate.

The Bangladesh Bank relaxed money supply regulation to create liquidity for stimulus
packages. A 360-day repo facility was implemented, and the repo rate was cut from 6% to
5.25% and 4.75%. The reverse repo rate dropped from 4.75 to 4 percent. The Cash Reserve
Ratio (CRR) was cut from 5% to 3.50% daily and 5% to 4.00% biweekly to increase banking
system liquidity. Nevertheless, it is important to acknowledge that banks may encounter
difficulties in terms of their lending ability, as the pandemic is expected to result in a
decrease in returns from borrowers (Alo & Hossain, 2020). To acknowledge this concern, the
Bangladesh Bank implemented proactive measures to mitigate the problem. Efforts were
undertaken to generate a currency value of BDT 707.94 billion through the implementation of
refinancing schemes and the relaxation of regulatory limitations. These measures aimed to
enhance liquidity for banks and bolster their lending operations.

Chapter 03 Conclusion
The COVID-19 pandemic had significant macroeconomic implications for Bangladesh,
resulting in a rise in unemployment, deflationary pressures, and a substantial decline in GDP
growth. The aforementioned repercussions were precipitated by the outbreak of the epidemic.
In response to the extraordinary crisis, the government of Bangladesh enacted expansionary
fiscal measures and provided financial assistance to both disadvantaged populations and
enterprises. The Bangladesh Bank played a crucial role in ensuring liquidity and stability
within the financial sector by implementing measures to relax monetary policy.

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6
References
BB, 2020a. Bangladesh Bank Quarterly. [Online].
CPD, 2020b. Challenges of Policymaking in Times of Pandemics: State of the Bangladesh
Economy in FY2020.. Centre for Policy Dialogue.
Opu, M. H., 2020b. Coronavirus: BGMEA says orders worth $3.15 billion cancelled so far.
Dhaka Tribune.
Outlook, W. E., 2020. World Economic Outlook, October 2020: A Long and Difficult
Ascent. IMF; International Monetary Fund.
Rahman, S. H., Razzaque, A., Rahman, J. & Shadat, W. B., 2020. Socio-Economic Impact of
COVID-19 and Policy Implications for Bangladesh. Policy Brief, Series: Macroeconomics
01.
Welle, D., 2020. Coronavirus: Economy down, poverty up in Bangladesh. Asia| An in-depth
look at news from across the continent.