According to World Health Organisation (WHO), Coronaviruses (CoV) are a large family of viruses that cause illness; such illness range from the common cold to more severe diseases such as Middle East Respiratory Syndrome (MERS-CoV) and Severe Acute Respiratory Syndrome (SARS-CoV). COVID-19 is a new strain that was discovered in 2019.
Though the world faced several pandemics in the 21st century such as Severe Acute Respiratory Syndrome (SARS) in 2002, N1H1 (Bird flu) in 2009, Middle East Respiratory Syndrome (MERS) in 2012 and Ebola in 2013-14, the Novel Coronavirus or Covid-19 is different due to its exponential growth and attacking powers. WHO announced the COVID-19 outbreak a Pandemic on 12 March 2020.
Given the nature of the disease, it is unpredictable as to what will be the nature and extent of health and economic losses. International organizations have made preliminary estimations on economic losses. However, the impact will depend on the duration of the diseases and the type of remedial measures taken to tackle the disease.
It is apprehended that the impact of COVID-19 and the global economy can be severe, and the global economy may fall into recession through the following channels:
- Direct impact on production
- Supply chain and market disruption
- Financial impact on firms and financial markets
Thus, this virus will bring economic shocks. Tangible economic shocks can be categorized into two: firstly, purely medical shocks – as the affected persons cannot contribute to GDP and secondly, the economic impact of public and private containment measures – things like school, office, and factory closures, travel restrictions, and quarantines.
Hence, Bangladesh will face an economic shock by declining export and tourism revenue in a large-scale due to restricted export policies and travel bans.
For example, the Asian Development Bank (ADB) (2020) predicts that in a hypothetical worst-case scenario (no tourism receipts and the sharp decline in domestic demand in China for six months plus the outbreak in other Asian economies lasting three months), Bangladesh will lose approximately $3 billion in its GDP (1.10 percent decline) and there will be job cuts for around 9 million people.
Specifically, in the sectoral scenarios, the highest GDP loss and job cuts will be in business sector including the financial sector, trade, and public services by $ 1.14 billion and 2,01,106 people respectively followed by agriculture ($637 million, 4,58,000 people), tourism ($510 million, 50,000 people), construction and utilities ($ 400 million, 1.18 million people) and transport service ($334 million, 67,000 people).
Negative impact on GDP growth performance as a consequence of knock-on effects of the pandemic on Bop position (weakened), and demands side (slackened) and supply-side (disrupted) impacts on external sector-related activities.
COVID-19’s adverse implications are being felt at a time when Bangladesh’s External Sector is under considerable pressure on several fronts:
- The export target for FY2020 (12%growth) is highly unlikely to be attained in view of the negative growth over the first eight months of FY2020 (-4.8%)
- Major export items such as knitwear (-5.7%), woven wear (-5.9%), home textile (-7.5%), frozen fish (-4.4%), and leather and leather products (9.1%) posted negative growth.
- Import growth over the first seven months of FY 2020 was negative (-2.7%)
- Important import sub-components such as intermediate goods (- 2.1 %) and Capital goods (-8.3%) including capital machineries (-22.0%) posted negative growth
- Remittance sector however registered positive growth in terms of robust growth of inflows over the first seven months (+21.5%), and arise in numbers of migrant workers going abroad (+4.2%)
- During first six months of FY2020, the negative trade balance (-8.2billion US$) and services balance (-1.7 billion US$) could hardly be balanced by the positive secondary income (rising to +9.6 billion US$ thanks mainly to remittance) and declining financial account (falling to +1.8 billion US$)
As a consequence, the overall BoP position in December 2019 (+0.027 billion US$), while somewhat better than December of the previous year (+27.0 million compared to – 513.0 million US$), remained weak.
ACTIONS TO RECOVER FROM THIS CRISIS
Notwithstanding the shrinking fiscal space and the weakened financial sector, an expansionary but targeted public expenditure, and monetary policy should be pursued in view of the emerging situation.
While the fiscal deficit is likely to reach 5.5% of GDP in FY2020, the likely rise in the budget deficit will need to be managed through prudent reallocation and prioritization of public expenditure, and, renewed efforts at domestic resource mobilization (by curbing tax evasion and illicit financial flow).
The above should involve the followings:
Fiscal Interventions
- Use the fiscal space efficiently and with inclusivity.
- Review how poor people living in the informal economy can be supported, including safety net transfers to people working in the informal sector in both rural and urban areas.
- Higher demand for cash incentives in the wake of COVID-19 may put additional pressure; however, the cautious approach should be adopted while designing any fiscal stimulus.
- To help address snags in supply chain taxes at import stages may be reduced selectively.
- Keep flexibility in the next budget (for FY2021) to cope with the potential impact of COVID-19.
Monetary Policy
- Lower policy rates to inject additional money into the economy.
- L/C margins on imports and L/Cs against export development fund may be extended from 3 months to 6 months.
- The government may buy T-bills etc. from the commercial banks to inject money into the system.
- Rescheduling facilities for outstanding loans should be extended on a case by case basis.
- With COVID-19 affecting SMEs, the lending rate to them may be reduced to 5% for a limited period.
Addressing The Health Emergency
- Increase budget allocation for COVID-19 related areas in a focused and targeted way: production, supply, and distribution of medicine; improvement of health services; availability of medical instruments and support to health professionals.
- The increased government spending should be first directed to the health sector for supporting all essential expenditure on prevention, containment and mitigation of the virus, including higher overtime pay and better working environment conditions (especially the health care personnel who are involved in taking care of those infected), as well as research. To stimulate the motivation of that health care personnel and to consider the people’s safety, the government should declare a health insurance policy.
- Open new financial channels to support health-related actions with a flexible procurement system using domestic and available foreign finances.
- Exempt the taxes on all medical supplies (e.g., medicine, equipment, protective gear) required for confronting the coronavirus challenge.
- Bangladesh should apply for an international healthcare relief package.
- World Bank had pledged to grant up to $12 billion.
- The government has already asked for an emergency fund of $100 million to tackle the situation.
- IMF is prepared to grant a sum of $50 billion.
- Out of which, $10 billion will be allocated for low-income countries that will have zero interest rates.
- ADB has offered a package to the tune of 6.5 billion
- Islamic Development Bank (IsDB) has dedicated $730 million for a special ‘Strategic Preparedness and Response Facility’ for member countries
Bangladesh Government and the Central Bank must ensure that interrupted economies continue to function amid the virus outbreak. In this regard, the government should instruct the financial and non-financial institutions, educational institutions, and all government and non-government institutions to set up cloud-based work at home facilities so that they can continue their smooth operation during such occurrences.
G4S BANGLADESH: INITIATIVES TO ALLEVIATE THE CRISIS
As a large employer, G4S is exposed to the human and economic impact of the COVID-19 outbreak. In the same way, as our colleagues work for clients’ security and to protect their property, we care about their wellbeing.
Any large scale spread of COVID-19 in the country is likely to affect G4S operations and cause a negative impact on business. In this backdrop, G4S Bangladesh develops a Business Continuity Plan (BCP) to evaluate the possible threat to business, prepare the business components to combat the crisis, plan appropriate contingency, and achieve full recovery.
Objectives of Business Continuity Plan (BCP):
- To be able to identify the level of threat existing at a given point of time.
- To be able to create required awareness among the staff against the infection.
- To be able to prevent and minimize infection among their own staff, their families, and valued clients.
- Prevent and minimize the negative financial impact on business due to the reduction of staff or reduction/stalemate/closure of business components.
- Resumption of business within the shortest possible time.
- Most importantly, to uphold the reputation of G4S by providing undisrupted/ reliable service to the valued clients even in the face of a national disaster.
With the growing threat of Coronavirus, many organizations like G4S have asked employees (wherever possible) to work from home. Whilst we acknowledge that many G4S office-based employees already work from home either part-time or full time, the current situation is different. Now, with the majority rather than a minority of employees working remotely, we can expect normal work patterns, communication methods, and team dynamics to be disrupted.
Now is the time to prepare for COVID-19. Simple precautions and planning can make a big difference. Action now will help protect employees and businesses.
Data Source: CPD Report, WHO, ADB, G4S Bangladesh
About The Author:
Ahmed Golam Kibria CMA (Aus)
Vice President (Finance)
G4S Secure Solution Bangladesh Pvt. Ltd.
