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Podcast: Covid in Bangladesh…what the government did - and didn’t do

In the first episode of the new series of our Policy in Pandemics podcast, Acting Chief Economist, Stevan Lee talks to Selim Raihan, Professor of Economics at the University of Dhaka and Executive Director at SANEM, about the economic impacts of the Covid-19 crisis in Bangladesh.

OPMglobal · Policy In Pandemics: Covid in Bangladesh…what the government did - and didn’t do

More than a year and a half into the global Covid-19 crisis, some patterns have emerged. Countries in Europe and the Americas have suffered much higher mortality, so far, than those in other regions. High-income countries, despite sluggish growth since the global financial crisis in 2008, were able to mobilise an enormous, multi-trillion dollar stimulus to protect their economies and as a result, although these economies shrank in 2020, they are growing back very strongly now. Middle-income countries did less. Lower-income countries, especially those constrained by a high level of indebtedness, did a lot less in terms of stimulus and economic mitigation measures. As a result, in the poorer countries, there is more ‘scarring’, ie enduring economic damage, growth is slower, the recoveries are much more drawn out with continuing welfare losses.

Bucking the trend

But there is a lot of diversity in the experience and Bangladesh stands out from the general pattern. Bangladesh is lower-income but has been growing strongly and is not very indebted or financially constrained. The growth-driving garment sector was hit hard by the global recession initially, and exports fell by 18% in 2020. But the Government of Bangladesh is adept at helping the garment sector, took action fast, made sure the lockdown rules were not too onerous for garment factories and the sector recovered quite quickly. The outlook for growth is again strong. Don’t forget the informal sector

At the same time, Bangladesh, neighbouring India, faced quite a severe Covid crisis and introduced reasonably stringent lockdown measures in the first part of 2020. Initially, this hit the informal urban service sector, which actually employs far more people than the garment sector. Bangladesh has a small state but it could afford to take a lot of action to protect these enterprises and households, unlike many lower-income countries with high debts. However, where the Bangladeshi state is adept at helping the garment sector, it is not so used to helping these groups, and found it difficult to find channels for the planned assistance – implementation was slow and the economic mitigation action that was wanted failed to materialise. Poverty rose sharply in urban areas.

Colleagues at SANEM in Dakar conducted rapid phone surveys which show that economic and poverty impact was leaking into rural areas because, of course, there are economic linkages and if disruption is heavy and enduring in cities, then it spreads to other sectors too.

Feeling the pinch

As a result, the outlook for GDP in Bangladesh is strong, driven by garments as usual, but scarring across the rest of the economy has pushed up poverty from 12% to 19% of the population. With this coming back down only slowly – levels are still likely to be over 16% by 2023 – the impact on livelihoods will be felt for years to come.