Against all the odds 2021 ushers in with a lot of expectations. The Covid-19 pandemic which engulfed our economic and social lives in every possible manner in 2020 is expected to be brought under control as hopes are high with the approval of vaccinations developed by a number of companies. However, one does not quite know yet when we will be able to lead a normal life again. When will everyone get vaccines and how will vaccination react to human bodies? Whether people will be willing to take vaccine has also become an issue that has to be dealt with by governments across the world.
Amidst so much unknowns and uncertainty, we set our eyes to a new year. Leaving the sufferings behind, we would like to think of 2021 as a new beginning, to do things in a better way. Countries are mapping their way forward. They have expressed their will to build the future better by taking specific actions in economic, social and environmental areas. This, of course, will not be easy as the pandemic has devasted the world in an unprecedented way.
2020 was a challenging year for Bangladesh too
For Bangladesh, the outgoing year 2020 was equally challenging. In fiscal year 2020, prior to the outbreak of the pandemic, the Bangladesh economy was somewhat under stress due to the weak performance of a few economic indicators such as exports, imports, private investment, foreign direct investment, and revenue mobilisation. Besides, the banking sector was suffering from high non-performing loans (NPL).
Like all other economies, ours has experienced pressure due to the disruption in economic activities during the pandemic. Both domestic and global demand contracted. As our economy is integrated with the global economy, a downward trend was observed in case of exports, outflow of Bangladeshi migrants for work, and foreign investment. On the domestic front, depressed domestic demand has been reflected through low investment. Credit flow to the private sector and import of capital machinery had been low. Job losses by a large number of people had also reduced demand. All these had an impact on growth which was on an increasing trend during the last decade. Thus, in fiscal year 2020, the growth of gross domestic product (GDP) was 5.2 percent as opposed to 8.2 percent, which the government projected originally. Several studies have indicated that low growth and slower economic activities had a knock-on effect on poverty, unemployment, education, inequality and many social aspects.
But Bangladesh remained much less affected than others
Bangladesh has undertaken several measures to overcome the negative effect of the pandemic. These include instructions on social distancing, wearing masks and general holiday for 66 days during March-May 2020. Parallelly, the government introduced several stimulus packages to help the affected sectors and people due to the pandemic. Till November 2020, the amount of the stimulus packages was equivalent to 4.3 percent of its GDP.
Due to government efforts combined with the hard work of the people, the Bangladesh economy has been less affected compared to other countries during the pandemic. Several international organisations including International Monetary Fund, World Bank, and Asian Development Bank have assessed the economic performance of countries during the pandemic. Bangladesh's performance stands out amongst its peers. Despite the pandemic, agricultural production has been exceptionally good—that helped ensure food security. Remittances have soared in recent months, foreign exchange reserve has reached the highest level ever, exports picked up towards the end of the year and inflation remained low.
Looking ahead for a resilient and sustainable path
In view of this, Bangladesh looks forward to seeing brighter economic prospects in 2021. For Bangladesh, 2021 is also a special year. The country will celebrate the golden jubilee of its independence. This will be the year to celebrate our achievements in the last 50 years. This will also be an occasion to reflect on the constraints and commit ourselves to expedite efforts to fulfil the unmet dreams in the next 50 years. Bangladesh must also seize every opportunity that comes in its way in the coming years.
Among a number of initiatives that are required to achieve the unfulfilled goals, a few can be reiterated. First and foremost is the need for institutional strengthening and reform. For rebuilding the economy from the fallout of the pandemic, public expenditure is the key. Therefore, more fiscal room is to be created through domestic resource mobilisation and its efficient utilisation. Fiscal discipline through prudent fiscal management will be critical for economic recovery. In this regard, governance of the financial sector will also have to be ensured. In recent times, liquidity situation in the banking system has increased which led to low interest rates. This is due to weak investment demand and Bangladesh Bank's measure to create liquidity space in commercial banks. The volume of the NPL in 2020 may not be a reflection of the real situation since Bangladesh Bank had frozen loan classification from January 1 to December 31, 2020 in view of the pandemic. The embedded weakness of the sector emphasises the need for reforming the sector and establishing better governance in the system.
Second, the anti-corruption drive should be continued and strengthened. Corruption in public investment projects reduces fiscal space. Studies have indicated how corruption affects growth. A large part of resources is also sent out of the country illegally. By preventing corruption, resource efficiency and economic competitiveness can be enhanced.
Third, investment on human capital has been reinforced during the pandemic. The weaknesses in the healthcare system was evident during the pandemic management. Increased allocation for the health sector and appropriate utilisation of the allocated resources are essential. For human capital development, education is an important means. Improvement of human resource capacity through skills development is the need of the hour. For a sustainable recovery from the pandemic, creation of opportunity is not enough. Access to opportunity for all has to be ensured. This will also require quality education and technological skills. During the pandemic, digital technology has played a pivotal role in facilitating activities and connecting with the world. However, without affordable access to technology there may be a digital divide leading to further inequality.
Fourth, Bangladesh can also set a milestone on its 50th anniversary by initiating the universal social protection scheme for the poor. The need for a comprehensive social protection for all including those in the informal sector has been felt acutely during the ongoing pandemic.
Fifth, 2021 is also an opportune moment for discarding the unsustainable way of development which is based on destruction of natural resources and biodiversity. This pattern of development creates inequality by depriving the poor to access the natural commons. To achieve sustainable development, the government has to work towards tackling climate change at the global level and preventing environmental degradation at the domestic level.
Bangladesh can make 2021 a year full of opportunities by doing the above and much more!
Dr Fahmida Khatun is the Executive Director at the Centre for Policy Dialogue.
Views expressed in this article are those of the author and do not necessarily reflect the position of the organisation she works for.