The COVID-19 pandemic affected the economic and social well-being of Bangladesh in many ways. These included a slowdown in economic activities, significant loss of jobs, sharp decline in exports, and increase in the incidence of poverty.

The country's gross domestic product (GDP) growth sharply came down to 3.5% in fiscal year (FY) 2020 from 8.2% in FY 2019. The provisional growth rate for FY2021 was 5.5%. In the face of this falloff in growth, the International Labor Organization in November 2021 estimated that 5 million full-time jobs were lost in Bangladesh in FY 2021. To its credit though, the economy did not experience contraction, as so many others did in the pandemic-fuelled global recession.

The Bangladesh Bureau of Statistics (BBS) has come up with the final figure of the Gross Domestic Product (GDP) of Bangladesh in the fiscal 2020-21, reflecting a sharp and clear V-shaped recovery from the devastating impacts of Covid-19 on the economy.

Nearly eight months after the fiscal year had ended, the BBS revealed that the economy achieved 6.94% of growth in the last fiscal year - a little more than double the growth of 3.45% in FY20.

Most think tanks from home and abroad were anticipating an L-shaped prolonged recovery path for Bangladesh with about 4% of growth. Some of the organisations predicted a U-shaped moderate growth path with more than 5% of growth.

But the final estimation of the BBS surpassed the projection of all development partners. Even the final growth figure of the BBS is 1.51 percentage point higher than its preliminary estimation. Planning Minister MA Mannan revealed the final GDP report of the BBS at a press briefing following the meeting of the Executive Committee of the National Economic Council (Ecnec) this week at the NEC auditorium in Dhaka.

He said, "The GDP growth for the last fiscal year reached 6.94%, which was 5.43% during the provisional estimate, however by the end, it increased by 1.51 percentage points."

The GDP growth edged down to three-decade-low 3.45% in FY20 due to the Covid fallout, said the BBS final report on 5 August last year.

Calling the growth "a miracle" amid the pandemic, the minister said, "Our GDP growth upturned to nearly 7% while many other countries took a hit."

He said the prime minister is very happy with the achievement and she has dedicated this to the countrymen.

"As per the initial estimation, the size of GDP was $410.82 billion, which later rose to $416.26 billion," Minister MA Mannan added.

Meanwhile, Bangladesh's per capita income has increased to $2,591 that previously was estimated to be $2,554.

Speaking at the same programme, State Minister for Planning Dr Shamsul Alam said, "The growth in national GDP is proof that our economy has bolstered since we have made progress in sectors, such as exports and remittances."

The IMF projected 4.6% of GDP growth for the last fiscal year, while the projection of the World Bank and Asian Development Bank was between 5% and 5.5%.

State Minister for Planning Dr Shamsul Alam said, "The growth in national GDP is proof that our economy has bolstered since we have made progress in sectors, such as exports and remittances."

The IMF projected 4.60% of GDP growth for the last fiscal year, while the projection of the World Bank and Asian Development Bank was between 5% and 5.5%.

It must be noted that the nearly 7% growth estimate has been taken with a dose of incredulity among economists. It is true that a 1.5% differential between the provisional and final figure would require significant jumps in investment or in the output of sectors like manufacturing to justify it. But nothing of the sort is there.

Investment in the final calculation increased by only 2.19% when compared with the provisional estimate. BBS found the rebound of the industry sector helped the economy achieve its remarkable growth in the last fiscal.

The final calculation of the BBS found 10.29% growth in the industry sector, which was only 6% in the provisional estimate. The sector grew only by 3.61% in FY20. But the question remains, what could have occurred within the sector in the final quarter to bump up the final figure for industrial output to 10.3% from its 6% provisional estimate?

Climbing out of a hole

At its worst, estimated unemployment rate was 22.4% within the following quarter at the onset of the pandemic in mid-2020, according to the Bangladesh Bureau of Statistics. Poverty incidence is expected to increase above the pre-pandemic national poverty incidence of 20.5%.

The fiscal deficit is expected to rise above the government's customary target of 5% at least until FY2023, due to high spending on health, social protection, and relief and recovery measures.

To deal with the crisis, the Government of Bangladesh implemented containment measures and announced incentive and stimulus packages totalling $22.1 billion, which was equivalent to 6.2% of the gross domestic product in fiscal year 2021.

The special programs supported the additional expenditure needed to expand the social safety net and stimulate the economy to protect jobs. The programs also focused on meeting the needs of women and vulnerable groups.

Bangladesh Bank (BB) was assigned the job of the main implementing agency to coordinate the government's pandemic response. Despite difficulties at the start, especially with regards to reaching the help on offer to marginalised sections or the smaller businesses (CMSME), it has eventually been praised for its role in distributing the lower interest stimulus loans for big and small sectors.

Economists and business insiders said the stimulus loans for the big and small businesses worked like oxygen to face a crisis during a pandemic period.

Former BB governor Dr. Salehuddin Ahmed told our sister newsagency UNB that the central bank has done a tremendous job, emphasizing implementation of stimulus loans.

Despite some criticism of delayed disbursement, the BB's contribution to economic recovery is appreciable, he said.

Md. Jashim Uddin, president of the Federation of Bangladesh Chamber of Commerce and Industry (FBCCI) and Faruque Hassan, president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) echoed similar sentiments.

They also acknowledged that the support of BB has worked to increase the confidence of businesses which helped them rebound in the production of the industries.

Latest update of stimulus loan disbursement shows that around Tk1.218 lakh crore (Tk1, 00,218 crore) has been disbursed so far in first and second phases from 10 incentive packages managed by Bangladesh Bank.

Of this, Tk 42,173 crore was disbursed to the industry and services sector, Tk 20,793 crore in cottage, small and medium enterprises, Tk 513 crore in refinancing loans in the pre-shipment sector, and Tk 2,492 crore disbursed among low-income professional farmers and small traders.

Besides, Tk 21,250 crore from the export development fund, Tk 1,933 crore from SME sector loan guarantee scheme, Tk 5,000 crore for workers in export-oriented industries, Tk 1,390 crore for consumer interest subsidy and Tk 4466 crore for agriculture sector refinancing scheme has been distributed.

However, a fund of Tk 1,000 crore was set up for the salaries and allowances of the employees of hotels, motels and theme parks in the tourism sector but no loan was disbursed.

The BB started implementation of the second phase of 10 stimulus loan packages from July of current fiscal year 2021-22 through banks and FIs. The BB released an update of stimulus loan activities till January 11, recently. It said banks and financial institutions (FI) have disbursed Tk 15,000 crore among 67,000 entities in big and small categories across the country till January 11, 2022.

According to the BB, in the first phase, Tk 32,703 crore was disbursed from the announced incentive fund of Tk 40,000 crore for the industry and services sector. Some 3,306 units have received this loan. In the second phase Tk 9,470 crore has been distributed from this fund to 972 businesses.

Although the interest rate of this fund is 9 percent, the customers have to pay 4.5 percent while the government bears the rest.

Besides, Tk 5,407 crore has been disbursed in the second phase under the announced stimulus package for cottage, small and medium enterprises. Around 35,760 enterprises have received loans from this fund of Tk 20,000 crore. In the first phase, a loan of Tk 15,386 crore was given from this fund to 97,814 enterprises.

The interest rate on this loan is 9 percent, but here again the government is giving a 5 percent subsidy on the interest rate.

In the agriculture sector Tk 379 crore has been disbursed to 30238 farmers/ clients from the agriculture refinance funds in the second phase. In the first phase Tk 4295 crore was distributed to 1.85 lakh farmers and agro based industries.

The farmers and agro industries have received the loans at 4 percent interest rate and Bangladesh Bank has provided the refinance funds to the lender banks at 1.0 percent interest rate.

Bangladesh Bank officials said that there was not as much interest to receive stimulus loans in the second phase. Demand for stimulus loans was higher among the businesses in the first phase.

In fact, the time has now come for those who have taken loans to repay their loans, they told UNB. And this too is a sign of the recovery underway.

Heating up

One of the most important indicators to date arrived this week in the form of data to show that capital expenditure bu businesses had picked up again. The country's import of capital machinery in the July-November period of FY22 was $1.66 billion and the spending for the same purpose in July-December of FY22 reached $2.69 billion. In July-December of FY22, the spending for capital machinery imports grew by 67.37 per cent year-on-year.

In the entire fiscal year of 2020-2021, the country's spending for capital machinery was $3.74 billion.

Capital machinery import grew sharply in December 2021 as high export orders might have instigated the country's exporters to take measures to enhance their production capacity, businesses said. Along with the major spike in capital machinery import, the country's import spending for industrial inputs also posted a major hike in the current fiscal year.

The country's overall import payments in half of the current fiscal year 2021-2022 grew by 52.91 per cent year-on-year. In the period of FY22 under consideration, the country's import spending increased to $38.39 billion against $25.11 billion in the corresponding period of FY21.

The high import spending might present a challenge ahead in terms of economic management, but for now, it has to be seen in the context of demand that was depressed during the onset of the pandemic rebounding to previous levels.

Exports meanwhile have been surging. The Export Promotion Bureau's latest figures reveal Bangladesh's export earnings reached an impressive $29.55 billion in the first 7 months of the current fiscal (2021-22), reflecting the strong economic recovery underway in its main destinations in the West, and putting it on course for a record-breaking year.

Out of total export income, 81.17 percent or $ 24 billion comes from the garments and textile sector.

According to the EPB, despite the slowdown in the economic activities at the beginning of the FY 2021-22 due to the surge of Covid-19 infection rate, the entrepreneurs have been able to earn a record volume of foreign currency in the last 7 months by exporting goods.

Export earnings increased significantly in January this year after November-December last year. This growth has been based on the garment industry, the main export sector of the country.

Among the two sub-sectors of the garment industry- woven and knit have contributed more. A few years ago, foreign exchange earnings were more from the export of woven garments than from knit. However, since the beginning of the Coronavirus pandemic, the knit has risen, leaving behind woven.

In the first 7 months of FY 22, knit garment exports amounted to $ 13.27 billion which is 32.89 percent compared with the same period of last year. On the other hand, the export of woven garments was $10.71 billion, which is 27.23 percent growth compared with the previous year.

At the same time, home textile exports stood at $830 million, up 30 percent from the same period last year. During July-January, 55.34 percent of the income from garment exports came from knit garments.

For the current fiscal, the government has set a target of earning $51 billion export from goods and services, including $35.14 billion from garment exports.

Friend in Need

Of all the multilateral agencies, it is the Asian Development Bank that has stood most steadfastly by Bangladesh as it tried to deal with the vagaries of the pandemic. ADB in 2020-2021 committed $4.56 billion for projects and programs in Bangladesh including more than $2.6 billion for managing the immediate economic, social, and health-related impacts of the COVID-19 pandemic.

The assistance includes $500 million in rapid budget support approved in April 2020, within around one month after receiving the government's request. This support forms part of ADB's COVID-19 Active Response and Expenditure Support (CARES) Project. This budget support has built on an earlier concessional emergency assistance and a grant to help provide for the immediate needs of medical supplies and logistics support.

"I am happy to note that ADB was the first development partner to come up with assistance to deal with the immediate challenges of the COVID-19 pandemic in Bangladesh," said ADB Country Director Edimon Ginting. "It is also heartening that we were able to stand beside Bangladesh when it needed our support the most."

The package was designed to help Bangladesh strengthen its public health system, speed up the country's social and economic recovery by widening social safety net coverage, provide salary support to workers in export-oriented industries, and extend low-interest loans to affected industries and farmers.

As a result, the ADB assistance delivered benefits to more than 15 million poor and vulnerable people in Bangladesh. More than 3.8 million workers in export-oriented industries (53% women) received wage subsidies of Tk49.45 billion or $576.3 million. Industries, and micro, small, and medium-sized enterprises, which were affected during the pandemic, received Tk481.50 billion or $5.6 billion loans.

More than 20,800 doctors, nurses and other frontline medical workers received two months basic pay as honorarium.

"I am confident Bangladesh will return to its pre-COVID19 high economic growth path soon by successfully implementing its robust economic and fiscal measures to protect the poor and vulnerable including women, and cushion trade and businesses," said Ginting recently.

That is quite the ringing endorsement.