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REGIONS ASIA-PACIFIC


THOSEWHOCAMETO THE CITIES FOR THEIR BETTERMENT ARE GOING BACK TO THEIR VILLAGES TOSURVIVE


Bangladeshshows virus resilience C


THE COUNTRY’S PER CAPITA GDP IS NOW BIGGER THAN INDIA’S. MEGHA BAHREE REPORTS


ovid-19 has decimated econo- mies across the world. One of the lucky few emerging


unscathed, economically, is Bangladesh — the nation of 160 mil- lionwhich is projected to see its econ- omy grow by nearly 4% this year.


However, a careful look behind the headlines reveals that all may not be as well as the num- bers portray. In October, the International Monetary


Fund (IMF) predicted that the south Asian nation would see its economy grow this year at 3.8%. That number stood out even more when compared to its much larger neighbour, India, where the IMF expects its economy to shrink by a drastic 10.2%. Not only that, Bangladesh’s per capita gross domestic product of $1888 is set to overtake India’s $1876.5, a prediction which is causing a lot of noise in the Indian media.


Driving growth For the past several years, Bangladesh’s econ- omy has been propelled by what is known as the ‘Two R’s’ approach: ready-made garments (sold predominantly to Western countries) and remittances from workers abroad. Contrary to expectations, both of these have done well so far this year. That money, in turn, has been spent on goods and services in Bangladesh, greasing the wheels of the local economy. The garments sector was initially hit by “an


unprecedented tsunami” of orders being canceled or held up, saysRubanaHuq, president of the Bangladesh Garments Manufacturersand Exporters Association, as the first wave of the coronavirus swept across the world earlier this year, and Dhaka, like many other governments, locked down the country from late March throughMay to rein in its spread. A government handout of a special loan


scheme — part of a $9.9bn liquidity support it announced to pay wages to workers while assist-


68


ing with working capital loans — helped keep the industry on its feet during the lockdown. It preventedthe “shockreaction”amongmanufac- turers to lay off employees, says Ashraf Ahmed, chief executive officer at Riverstone Capital, a merchant bank in Dhaka, until exports started recovering in the July-to-September quarter (and ultimately bouncing back to levels similar to the same period a year earlier). However, a good chunk of those exports was


made up of stock that had been manufactured before the lockdown, says Ms Huq. And with a second wave of the virus hitting the US and Europe in autumn, the industry is once again seeing a decline in exports, which is “troubling for the many factories which are already strug- gling to survive, having been affected by the first wave,” Ms Huq continues. While the manufacturing cycle is easy to


understand and trace through orders and exports, economists in the country have been left puzzled by the other big booster of eco- nomic growth—remittances.


Growing remittances The millions of migrant Bangladeshi workers abroad, including a vast majority in the Gulf, were hit as those economies locked down (and oil prices plummeted). Yet the flow of remit- tances increased month on month starting in May (after a brief dip in April), and reached a record $2.6bn in July, only to adjust around $2.1bn each in September and October, accord- ing to official data. In the previous 2.5 years the monthly inflow of remittances had never exceeded $2bn. “This has been slightly a mystery,” says an


analyst witha global development finance insti- tution who declined to be named. Economists tracking the inflows initially assumed that workers who were returning home — at least 200,000 as per the analyst cited above — either because they had lost their jobs or to be closer to


www.fDiIntelligence.com December 2020/January 2021


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