Economic woes to linger | The Daily Star

    Fitch Solutions points out vaccine deficiencies, the absence of a strict lock

    Implementing public infrastructure projects, such as the Dhaka Metro Railway, could boost private sector business investment, according to the Fitch Solutions report. The photo was taken yesterday. Photo: Sk Enamul Huq

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    Implementing public infrastructure projects, such as the Dhaka Metro line, could boost private sector business investment, according to the Fitch Solutions report. The photo was taken yesterday. Photo: Sk Enamul Huq

    The Bangladeshi economy may continue to suffer from the Covid-19 pandemic throughout the current financial year due to vaccine shortages and the government’s inability to impose a severe blockade, a Fitch Solutions report recently reported.

    It has also revised its forecast for the country’s GDP growth for the year 2021-22 to 5.5 percent from its previous forecast of 6.7 percent.

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    “We believe that Bangladesh will continue to strive to achieve immunity to Covid-19 herd through vaccines as a result of the lack of vaccines, given its dependence on the COVAX program for supply,” the report said.

    “In addition, the inability of the government to reliably enforce strict restrictions for as long as it takes to stop an ongoing epidemic is likely to result in pandemic-related reasons burdening the country’s economic recovery,” he said.

    “… And prevent a return to the pre-pandemic growth rate of 7 to 8 percent in the near future,” said the report, entitled “Persistent Pandemic Headwinds to Cap Bangladesh’s Economic Recovery Prospects.”

    The report, however, said that such a 5.5 per cent GDP forecast reflects its expectation for the country’s economy to continue to show resilient growth.

    The country’s economic activity will also face fewer disruptions than the weak enforcement of the lockdown, he said.

    Meanwhile, exports will recover from strong external demand as garment factories remain open amid foreclosures and public infrastructure investments from external financing will lead to fixed capital increases, he added.

    The Covid-19 vaccination campaign has made little progress since early February, with 3.7% of the population receiving at least one dose between April and July due to a lack of vaccines, he said.

    Vaccination efforts have only begun to accelerate since late July following improved vaccine supplies, with 5.4% of the population receiving at least one dose as of August 1, he said.

    Low vaccination rates for Bangladesh will pose increased transmission risks through fiscal year 22, with possible repeated lock-in as authorities try to contain outbreaks in the home.

    Bangladesh is dependent on the international COVAX program and the program is dependent on exports of Indian Covid-19 vaccines, which India stopped in May to divert supplies to its domestic vaccination movement, he said.

    Therefore, the risk of further vaccine shortages remains below the line that hinders Bangladeshi vaccination efforts once again, he said.

    Fitch Solutions in its report highlighted the risk of outbreaks being more frequent and persistent with subsequent locking applications, with the spread of the more contagious Delta variant of the coronavirus.

    However, he said society’s high tendency to circumvent lock-in restrictions and the government’s weak enforcement of lock-in regulations would ease the immediate economic shock of the blockades.

    The European and North American economies are strongly supported by rapid vaccination progress and fiscal and monetary stimulus, he said.

    Therefore, demand for clothes is likely to continue in the coming months, the report said, adding that Bangladesh is likely to benefit from diversions of orders from the region.

    He said Cambodia’s garment exports to the European Union have fallen sharply since August 2020, due to the partial loss of trade concessions for everything but arms (EBA) in certain clothing categories.

    “With Myanmar being an unattractive source of supply amid the country’s political turmoil, we expect Bangladesh, India and Vietnam to be eligible for order diversions,” he said.

    The report also said that the implementation of large-scale public infrastructure projects is likely to boost investment by private sector companies amid pandemic uncertainty.

    The projects include that of the Dhaka railway network, the Padma bridge, the railway extension as well as the land port, the seaport and the airport extension.

    The government has scheduled the Padma Bridge to open in June next year, while the Dhaka Metro Railway will be partially open next year.

    Private investment in the country has fallen to its lowest level in 14 years during the recent financial year due to the prolonged uncertainty caused by the pandemic and continuing structural weaknesses.

    In 2020-21, the ratio of private investment to GDP fell to 21.25%, according to provisional data from the Bangladesh Bureau of Statistics.

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