Quality growth in right sectors key to economic recovery
Quick disbursement of the government’s stimulus packages and quality growth in the right sectors will provide effective economic recovery amid the Covid-19 fallout, according to the South Asian Network on Economic Modeling (Sanem).
“Increased employment, a reduction in poverty and social discrimination alongside strong GDP growth will help the economy recover from Covid-19’s impact,” said Sayema Haque Bidisha, research director of Sanem.
Bidisha, also an economics professor at the University of Dhaka, made these comments while addressing a webinar on “Covid-19 and Bangladesh: Path to economic recovery” organised by Sanem yesterday.
She also stressed the need for inclusive growth to create a sustainable economy.
The research director suggested the inclusion of other performance indexes, which could focus on the real state of the economy.
Economic growth should not only be analysed through GDP growth, rather it should be measured by the country’s productivity, which is an indication of the rate of recovery, Bidisha said.
Sustainable growth is a key factor as it relates to a country’s employment, inequality, poverty and other macro variables, she said.
“True recovery means recovering the employment, income and wellbeing of millions of people,” she added.
A positive sign for Bangladesh is that the return of work orders for the garment sector and increased inward remittance is driving the country’s economic recovery, she said.
However, a number of challenges lie ahead as a second wave of coronavirus could hit during the upcoming winter and lead to uncertainty for the country’s trading partners, apparel export and remittance flow, she said.
Sluggish demand in the domestic market, low private investment and slow disbursals from the stimulus packages are still prevailing issues, according to the research director.
Besides, the existing challenges of inequality, new poverty, employment generation and institutional weaknesses are a few other barriers to the country’s economic recovery, she said.
Still though, the timely announcement of comprehensive stimulus packages, consistent growth in remittance, agricultural production and individual coping strategies have aided Bangladesh’s return to normalcy, Bidisha added.
The economy is improving over time but only some sectors are in rebound while others still suffer from the Covid-19 fallout, said Selim Raihan, executive director of Sanem.
Raihan, also a professor of economics at the University of Dhaka, emphasised on the need for a parallel recovery of social conditions and the economy.
“The country needs to recover from Covid-19’s impact on education, poverty, and discrimination in a similar way to how the economy is doing,” he said.
According to the executive director, foreign remittance is working like an informal social safety net in the rural areas.
“The positive growth in remittance and garment exports are the strengths of the economy at this moment,” he added.
Raihan also said there were more challenges to be faced, which includes the Covid-19’s impact on macro demand, while investments were currently unprotected.
People’s confidence in doing business is on a downward trend as production currently exceeds demand, he said.
The executive director also suggested that long term targets should be set instead of just GDP growth targets.
Mahtab Uddin, a lecturer of the economics department at the University of Dhaka, said a question remained over the effectiveness of cash incentives.
He suggested introducing an alternative to cash incentives to ensure effective economic recovery.
Now liquidity in the banking system has increased as demand for loans has declined, Uddin said, adding that the informal sectors should be brought under official channels by relaxing certain policies.
He also that implementing the stimulus package in innovative ways and identifying the number of informal sector workers and return migrants would also aid the country’s economic recovery.
Reducing the lead time of garment products and effective negotiation to avoid probable implications of a second wave of Covid-19 could help in this regard as well, he said.
Apart from reviving private investment, containing the virus is essential to jumpstart local demand and integrate with the global market, Uddin added.
Around 40 participants from all over Bangladesh took part in the webinar.