The Impact of Covid-19 on Unemployment of Bangladesh

Unemployment is one of the greatest problems for the development of the economy of
Bangladesh. A massive portion of the educated people in this country is unemployed.
Unemployment problem in Bangladesh becomes worsens due to Covid-19 Pandemic which
in turn severely affect the development of Bangladesh economy.
According to the World Bank collection of development indicators, Unemployment rate in
Bangladesh was 4.19% in 2019 where youth unemployment rate is 11.87% on that year
(modeled ILO estimate). From the viewpoint of analysts, unemployment rate in Bangladesh
is expected to reach 4.40 percent at the end of 2020 due to Covid-19 pandemic. Trading
economics members forecasted that, Unemployment rate in Bangladesh is prominent to trend
around 4.60 percent in 2021 and 4.50 percent in 2022.According to International Labour
Organization (ILO), almost 15 million people of Bangladesh working in several sectors will
become jobless because of the retard of trade and businesses due to the Covid-19 outbreak.
The first case of Corona virus disease in Bangladesh was detected in 8 March, 2020,
according to the report of IEDCR. From then, the number of infected people has increased
day by day and the government initially declared lockdown in 26 March, 2020 up to 30 May
2020 in seven different time slots. This pandemic accounts for a severe shrink in economic
activities. As a result people of lower and middle income classes have been experiencing a
vulnerable drop in income for the last few months. About 85% employed workers in
Bangladesh work in informal sector. Most of the people who lost their job in this pandemic
are going down the extreme poverty lane. In this pandemic, some people losses job
temporarily and some of the job losses are permanent. According to the estimation of CRI,
about 6 million people losses their job permanently which leads to nearly double the
unemployment rate. This would create “new poor” who have going down below the poverty
line because of income losses result from economic breakdown. This situation increases
inequality in the society which in turn disrupts the development of the economy. Bangladesh
Institute of Development Studies (BIDS) predicted that, the national poverty is increased by
25.13 percent. According to a survey, conducted by BIDS, titled ‘Coping with COVID-19’
conducted on May 5 to May 29, 2020, found that about 13 percent people have become
unemployed in Bangladesh due to this pandemic. Latest survey report of BIDS shows that
there are almost 16.4 million new poor in Bangladesh in 2020 as the income of lower and
middle income working-class people in urban and rural area has declined sorely. The South
Asian Network on Economic Modeling (SANEM) revealed that, the poverty rate in
Bangladesh will be 40.9 percent (almost double), with a negative income shock of 25 percent
in 2020 which means another 20.4 percent population will fall into poverty.
Here a figure given below represents the number of unemployed people and the number of
individuals impacted financially due to Covid-19 pandemic (estimates of various sources).

The number of Unemployed people and the number of individuals impacted financialy
due to Covid-19 pandemic
70
60
50 Unemployed(million)
Individuals impacted
40 financially(million)
30
20
10
0
World Bank ADB PRI CRI BIDS CPD PPRC/BIGD
.

In the first instance, the Covid-19 was found in China, the country which is a major raw
material supplier of manufactured products. So the virus primarily creates a shortage of raw
materials to the manufacturing countries which in turn leads to increase the cost of production
of manufacturing products. Then the Covid-19 spread to other countries and the demand for
manufactured products in national and global market, specifically in garment sector, has
declined drastically. In Bangladesh garments sector is accounts for around 80% of the
country’s total export earnings. Countries like Italy, Germany, the United Kingdom and the
US which are major markets for Bangladesh’s most important tradable products: readymade
garments are highly infected by Covid-19. Rubana Huq, the president of the Bangladesh
Garment Exporter’s Association (BGMEA), told that reopened garment factories are running
at only 55% capacity because of canceled orders from the buyers. It is forecasted that, in
Bangladesh, about $6 billion in export revenue will be lost during this financial year due to
cancellations of orders from some of the world’s largest brand. As the manufacturers didn’t
get new order for their product, and previous purchased orders are also getting cancelled,
manufacturers couldn’t pay wages to their workers and thus workers get laid off. This causes
more job losses in this sector.
Agriculture is one of the most important sectors of Bangladesh economy. The supply chains
of perishable goods are interrupted due to the Covid-19 pandemic. A research conducted by
BRAC on national food security found that, farmers across the country suffered a loss worth
approximately 565.36 billion taka (about $6.66 billion) during the 45 day lockdown period
which was incurred in months between March and May. A Survey was also carried out for
the research including the interview of 1581 farmers throughout the country. Farmers talked
about the lack of fair prices, limited operation of markets, higher prices of inputs and
unavailability of labor as the main reasons of their sufferings. Due to these limitations, each
farmer experienced a loss of an average of 207,976 taka during the 45 day lockdown period.
As workers losses their job in this pandemic, they reduces their spending on consumers
goods which creates lack of buyers for farmers. Because of the paucity of buyers and
unavailability of supply channels, farmers who owe loans are being forced to sell their
product at a low price to pay off their debts.
The Covid-19 pandemic also hit the flow of remittance earnings of Bangladesh. The
pandemic has a terrible effect on the migrants of Bangladesh who are greatly arrayed in
countries with strict lockdown system. One of the main sources of external earnings for
Bangladesh is remittance earnings which largely depend on host countries GDP growth,
economic activities, labour demand etc. As there is a negative change in the per capita GDP
of key host countries for Bangladeshi migrants like Qatar, Italy, the UK, the KSA and others
due to the pandemic, the remittance earnings of Bangladesh will experience eminent losses.
Host countries are themselves experienced economic breakdown because of pandemic
situation which causes a sizable layoffs of migrant workers. In March, 2020, Remittance
earnings decreased by 12% and in April by 25%. Experts told that about 1.4 million migrant
workers of Bangladesh may on their way to back home because of job losses. This incident
also pushes up the unemployment rate heavily. But the matter of wonder is that, remittance
inflow has increased notably in recent month which is comparatively higher than the last
fiscal year. In July 2020, remittance sent by Bangladeshi migrant workers was $2.6 billion
where in July 2019, it was $1.6 billion. Likewise, remittance inflow was $1.96 in August
2020 where it was $1.44 billion in August 2019. There may be two prime reasons behind this.
Firstly, these migrant workers try to support their families in this crisis. Secondly, as many
workers losses their job due to host country’s economic breakdown and there is no guarantee
to regained their job again, they have to return home with all their savings. In this critical
situation, the increase in remittance inflow has a significant impact for the development of
this distressed economy.
However, Bangladesh government takes various initiatives to recover the economy from this
crisis. According to the report of BSS, The Prime Minister of Bangladesh announced 19
stimulus packages worth BDT 1,02,957 crore (around $12.11 billion) which is tantamount to
3.7 percent of total GDP to revive the economy. The Government declared several stimulus
packages to protect SME, industry, service sector, agricultural sector etc. Among those, a
stimulus packages worth BDT 50 billion is announced for export-oriented industry which
should be used to provide salaries and allowance of workers and employees of those
industries. The prime minister also declared BDT 50 billion stimulus packages for
agricultural sector. Bangladesh Bank takes the initiatives to provide agricultural loan at 4% to
the crop sector. In 13 April, 2020, the Prime Minister announces direct cash aid worth BDT
7.6 billion for informal sectors workers. The government also talked about loan to provide the
returnee migrant workers to ensure their enduring income activities. Nevertheless the policy
makers should focus on skill development programs to make the unemployed workers more
productive and should focus on employment generation to quickly boost the economy. The
government should work on creating business free environment to encourage private
investment and reducing the unemployment problem for the recovery of the economy.
Written By:
Mahinur Begum Mimi
Undergraduate student of department of Economics
Noakhali Science and Technology University