ARMY INSTITUTE OF BUSINESS ADMINISTRATION

Savar Cantonment, Dhaka.

Submitted By:
Name:Abdullah Al Mehraj Hossain
ID:B4170B050
Batch:BBA5(B)

Course Teacher:S.M. Khaled Hossain

Course Name:Microeconomics

Date of Submission: 29/06/2020

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Objectives of the study

• To analyze the current condition of export import business of Bangladesh.

• To find the total impact on economy.
• To reveal the actions taken by government.
• To identify the necessary steps to support the export import sector.
• To emphasize the current condition of export import business of Bangladesh.

Methodology of the study

To conduct this study, we’ve collected data from both primary and secondary sources.

Secondary sources: Previous studies, Online news portals, Websites etc.

Data Findings

Bangladesh recorded one of the fastest growth rates in the world in the past few years with a
stable economic performance that has helped to reduce poverty and social inequalities. GDP
growth was estimated to have reached 7.9% in 2019 and is forecast to fall to 2% in 2020 due to
the outbreak of the COVID-19 and pick up to 9.5% in 2021, according to the updated IMF
forecasts from 14th April 2020. The post-pandemic global economic recovery and the private
consumption boosted by strong remittance flows from the Bangladeshi diaspora around the
world are expected to be the key drivers of growth in 2021.

Covid-19 and its impact on Bangladesh economy

The novel corona virus (COVID-19) hit Bangladesh at a point when its economy was already
under stress. Except for remittance income, all major economic indicators were underperforming
during the first few months of the 2020 fiscal year (FY2020). Remittance flows grew by 20.1 per
cent in the first eight months of FY2020 but both exports and imports registered negative growth.
Private sector credit growth declined to 9.2 per cent in January and remained lower than the 14.8
per cent target for FY2020 set by the central bank. This corresponds with low private investment,
which has stagnated at 23 per cent of GDP for the last few years.
Foreign direct investment (FDI) has not shown significant grown either. During the first seven
months of FY2020, FDI increased by only four per cent compared to fiscal year 2019 (FY2019).

Current Scenario Of COVID-19 in EXIM

This situation is coupled with weak macroeconomic management. Between July and February of
FY2020, actual spending under the Annual Development Programme (ADP) was only 38.5 per
cent of the planned allocation. And in FY2019, Bangladesh’s revenue–GDP ratio was only 9.9
per cent — much lower than the target of 15.1 per cent set out in the country’s Seventh Five
Year Plan.

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Revenue collection was so low during the first six months of FY2020 that it will need to grow by
87.5 per cent in the second half of the year to meet the annual target — a task that seems
impossible given current circumstances.
COVID-19 will further slow economic growth. Bangladesh is unlikely to achieve its targeted
growth of 8.2 per cent in FY2020. The World Bank has projected growth of 2 to 3 per cent,
while the International Monetary Fund has projected a rate of 2 per cent.
The economy is being affected due to both domestic disruptions and as a result of Bangladesh’s
interconnectedness with the global economy. At the domestic level, uncertainty will cause
private investment to decline further, impacting employment. The Asian Development Bank
has estimated that if the outbreak lasts for at least six months, Bangladesh will lose nearly
900,000 jobs due to a global economic downturn. Then there are the disruptions in production
and supply chains. Prices have gone up because of supply shocks. With less employment and
lower incomes, the economy is also experiencing depressed demand.

Economic Indicators
Bangladesh recorded one of the fastest growth rates in the world in the past few years with a
stable economic performance that has helped to reduce poverty and social inequalities. GDP
growth was estimated to have reached 7.9% in 2019 and is forecast to fall to 2% in 2020 due to
the outbreak of the COVID-19 and pick up to 9.5% in 2021, according to the updated IMF
forecasts from 14th April 2020. The post-pandemic global economic recovery and the private
consumption boosted by strong remittance flows from the Bangladeshi diaspora around the
world are expected to be the key drivers of growth in 2021.

In 2019, the general government gross debt remained relatively low - at around 34.6% of GDP -
as a result of a tight fiscal policy. Nonetheless, the tax base is narrow owing to a number of
exemptions, weighing on public revenue. Public debt ratio to GDP is consequently anticipated to
increase to 35.9% by 2021. A new VAT law was introduced at the start of the fiscal year 2019-
20 in an attempt to increase tax income; however, its impact has been limited since the launch.
VAT collection grew only by 1.8% in July-October 2019, the slowest growth rate in recent years,
according to the National Board of Revenue. Financial situation of the banking sector remains
weak due to a large share of non-performing loans and an increase in restructured loans. Inflation
moderated to 5.7% in 2019 and is expected to remain stable in 2020 (5.5%) and in 2021 (5.6%),
despite the COVID-19 pandemic. Current account deficit was estimated to have narrowed to
2.7% of GDP in 2019 as higher textile exports provided support. Nonetheless, deficit is forecast
to widen to 2.2% in 2020 because of high import requirements of the construction sector for
mega-infrastructure projects. Bangladesh is one of the most vulnerable countries in the world to
climate change, with extreme weather events estimated to have caused a loss of around 1.8% of
GDP in the past few decades. The country has taken measures to promote green financing and is
seeking grants from the international community, notably via the Green Climate Fund.
The official unemployment rate according to the latest survey of Bangladesh Bureau of Statistics
(BBS) was 4.2% during 2016-2018, but this more than doubles to 10.6% for the youth
unemployment rate. More importantly, 29.8% of young people in Bangladesh are not involved in
education, employment or training. Other social issues include constant social strikes, terrorist
threats, limited access to capital by the population, and disputes over Teesta River water
distribution with India. Climate change also poses a serious threat to Bangladesh. Transparency

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International ranks Bangladesh as 146th out of 180 countries in its Corruption Perceptions Index
2019, three spots higher than a year earlier.

Future Impact on EXIM

Bangladesh’s export income will shrink as overall global demand decreases. But its imports are
also being hampered — Bangladesh imports many raw materials such as textiles,
pharmaceuticals and leather from China for domestic production.
Foreign investment will also remain subdued. Remittance earnings will decline as economic
slowdown causes job cuts in destination countries. The flow of official development assistance is
now uncertain, which will hamper the implementation of Bangladesh’s ADP.
The Bangladesh government has announced a stimulus package for various sectors equivalent to
Tk 964 billion (US$11.43 billion), or 3.3 per cent of Bangladesh’s GDP. This support is mainly
for export-oriented industries, small, medium and large industries, the agriculture sector,
pandemic preparations, health workers and social safety net programs. The government has also
announced it will expand existing transfer programs that benefit vulnerable households and
committed to subsidizing the cost of food.
Other monetary policies include delaying repayments for non-performing loans by six months,
extending the time for paying the bill of entry on import-related letters of credit and lowering
policy rates. The central bank has lowered the repo rate by 0.5 per cent and the Cash Reserve
Requirement by 1.5 per cent to create additional liquidity.

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While these measures are noteworthy, more than 80 per cent of this package is liquidity support
which will be disbursed through banks. Affected businesses will be provided with working
capital to continue their operations. The government then provides an interest subsidy to those
loans. But the banking sector is already suffering from various challenges including high non-
performing loans, low profitability, weak management and influence by politically-connected
people. There are concerns that new loan opportunities will create additional burdens on the
banking sector.
The other worry is about people’s livelihoods, particularly those in the informal sector. While the
country has been in lockdown since 26 March, informal sector workers — who comprise around
85 per cent of the total workforce — are in dire need of income and food. Preliminary research
shows that the daily income of poor people dropped by 76 per cent in the first week of April
2020
Actions and Measurement taken by the Government

The country is also preparing its national budget for the next fiscal year, to be announced in
June. This year, the budget deficit may be higher than the usual 5 per cent of GDP because more
fiscal space needs to be created to tackle the impact of COVID-19. Budgetary measures should
aim to both stimulate domestic demand and strengthen supply chains through expansionary fiscal
and monetary policies. The efficacy of these policies will depend on how well they are managed
and coordinated by various government departments and how efficiently resources are
distributed among affected people.
Given resource constraints and the pressure on the economy, the prioritization of government
spending will be much more critical this year. Some activities may wait for a few months, while
others cannot. For example, immediate healthcare and health management-related expenditures
must be made to save lives. There should also be cash in the hands of the poor and support for
producers to strengthen supply chains.
While the government has to take these short-term measures promptly, it must also begin
designing medium- and long-term measures — for example, investing in the long neglected
health sector. One thing that is clear to all countries is that while confronting the immediate
fallout from COVID-19 seems daunting, the aftermath will be even more challenging.

CONCLUSION

On April 5, Prime Minister Sheikh Hasina unveiled a Tk72,750 crore stimulus package,
including the previously declared Tk5,000 crore package, to address the economic impacts of the
corona virus outbreak.
The amount is nearly 2.52 percent of the countries GDP. The government could take both fiscal
and monetary measures to combat the novel corona virus.
As per the prime ministers bailout plan, fiscal actions included stimulus packages e.g. direct
financial support for the affected sectors, widening social safety net coverage for poor people,
food distribution at a lower price among the poor people, as well as increasing monetary supply.
The monetary actions would be lowering the repo rate and reduction of the Cash Reserve Ratio
(CRR) to increase the money supply to the economy.

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REFERENCES
1. Economics/Revue canadienne d'agroeconomie. 2020 May 6.
2. M Shahriar Azad Bhuiyan. The Business Standards
3. Fahmida Khatun, Centre for Policy Dialogue
4. Export Enterprises SA, All Rights Reserved. Latest Update: June 2020
5. The Business Standards.

Websites:
https://tbsnews.net/thoughts/covid-19-and-its-impact-bangladesh-economy-69541

https://www.eastasiaforum.org/2020/05/07/covid-19-batters-bangladeshs-already-struggling-economy/

https://www.nordeatrade.com/en/explore-new-market/bangladesh/economical-context

https://tbsnews.net/thoughts/covid-19-and-its-impact-bangladesh-economy-69541