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Bangladesh's poverty rate rises to 30pc amid pandemic

FE Report | Tuesday, 13 April 2021


As the country is set to embrace a 'hard' lockdown from tomorrow (Wednesday), the World Bank (WB) on Monday released the Bangladesh Development Update (BDU) highlighting the impact of the Covid-19 on the labour market, including loss of jobs and rise in poverty.

The Country's poverty rate increased by 7.0 percentage points to 30 per cent in the last fiscal year than that of a non-Covid counterfactual scenario, the WB estimated.

As far as the GDP growth for the current fiscal year is concerned, the WB has kept its projection rather flexible, keeping in view the uncertainties centring the ongoing pandemic. Real GDP growth might be between 2.6 per cent and 5.6 per cent, the BDU said.

In a survey, the Washington based-lender found that one in five economically active individuals had experienced either a job loss (5.0 per cent) or a prolonged absence from work (14 per cent) since the onset of the Covid-19 crisis.

"Among the latter, the average duration of unemployment was three months. Of them, 51 per cent reported a loss in earnings or wages," the WB said.

In presence of WB country director Mercy Tembon, senior economists of the bank Bernard James Haven and Matias Herrera Dappe briefed journalist on the Update virtually in Dhaka.

According to the BDU, some 56 per cent of those who did not own their dwelling are reported unable to pay their rent in full in the month preceding the interview (Sept. to Nov. 2020).

Food insecurity, as measured by self-assessments by the respondents, was also substantial, with 54 per cent of respondents expressing concerns that they would run out of food, 41 per cent having to reduce their consumption of preferred food, and 32 per cent having run out of food or money in the week preceding the interview, the BDU noted.

The WB conducted the nationwide phone-based survey from September to November 2020 and documented substantial labour market impacts of the pandemic, including widespread losses in labour earnings and poverty.

The WB report, however, said if the economic growth of the country is firmed up, the poverty is projected to decline marginally in the current fiscal year (FY2020-21).

The WB report added that the subsequent surveys pointed to a gradual labour market recovery in major urban centres by February 2021 and the households in poor and slum areas of Dhaka and Chittagong self-reported that their food security has improved substantially.

The economy is showing nascent signs of recovery backed by a rebound in exports, strong remittance inflows, and the ongoing vaccination programme, the report said.

The WB has projected a 3.6 per cent gross domestic product (GDP) growth in the current FY as there are still some downside risks and uncertainties over the Covid-19 pandemic.

"Given the significant uncertainty pertaining to both epidemiological and policy developments, real GDP growth for FY21 could range from 2.6 to 5.6 per cent depending on the pace of the ongoing vaccination campaign, whether new restrictions to mobility are required and how quickly the world economy recovers," it added.

When asked about the conservative growth projections for Bangladesh even after some positive indicators, WB country director Ms Tembon said they had maintained a cautious approach as the pandemic situation at home and in global perspective was very uncertain.

"The outlook is subject to significant downside risks, particularly from the financial sector. The pandemic has exacerbated the financial stability risks stemming from high levels of non-performing loans (NPLs), weak capital buffers, and poor bank governance and risk management pre-date Covid-19". the BDU said.

Reduced profitability, weaker asset quality, and lower credit growth can have large second-round repercussions on the real economy, it warned.

The report further said that the fragile outlook for the global economic recovery adds external risks, if it impacts demand for RMG products and employment of Bangladesh's overseas workforce.

Meanwhile, the WB has projected a 5.1 per cent GDP growth in FY2021-22 as exports and consumption would continue to recover.

The bank also forecasted a better 6.2 per cent GDP growth in the subsequent FY23 as investment rises, led by externally financed public infrastructure investments under the recently adopted 8th Five-Year Plan.

"These dynamics will support job creation, and labour income is expected to rise as pandemic related disruptions wane in the second half of FY21. Private consumption is expected to continue a gradual recovery."

The BDU noted: "Although official remittances are expected to taper from record highs, inflows will continue to support household consumption. Strengthening competitiveness through improved logistics and competitiveness performance could help accelerate the Covid-19 recovery over the medium-term."

It said the inflation is projected to remain close to the Bangladesh Bank's 5.5 per cent target despite expansionary monetary and fiscal policies, and monetary accommodation is likely to continue.

The fiscal deficit is projected to remain at 6.0 per cent of GDP in FY2021 before moderating in the medium term.

External stability is likely to be sustained, supported by export growth and resilient remittance inflows.

Meanwhile, the BDU has cautioned about some significant downside risks. It said the movement restrictions could again be required if Covid-19 infections accelerate, disrupting economic activity.

Fiscal risks include a shortfall in international support for Covid-19 vaccination programmes, cost overruns on major infrastructure projects, and delays in tax reforms, it added.

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