It needs no emphasizing that the recent outbreak of coronavirus has palpably speared a sense of panic amidst millions of people across the globe. There are now significant outbreaks from South Korea to Italy and Iran and India. Reports on how the Covid-19 outbreak is affecting supply chains and disrupting manufacturing operations around the world are increasing daily and it is already threatening to hurt the world financial system including ours.
However, against this backdrop, the finance ministry has spurred some hope saying that the country would not face much difficulty in attaining its GDP growth target of 8.20 per cent for this fiscal year. The country clocked in 8.15 per cent GDP growth in fiscal 2018-19, the highest in the Asia Pacific region, riding on strong domestic demand and supportive fiscal and monetary policies. It is envisaged that the strong growth in the flow of remittance will contribute to furthering of domestic demand, said the finance ministry document prepared on the potential impact of the virus on the economy. Experts are of the opinion that the increased public expenditure under the annual development programme, the implementation of mega projects and increased investment owing to setting up of economic zones will have positive impact on the macroeconomic indicators. But there are possibilities that the supply chain disruption due to virus outbreak would have a significant repercussion for intra-regional trade in Asia Pacific including Bangladesh.
There could be a quick bounce back if the virus is seen to be contained, but with dire manufacturing data already out this weekend from China, markets probably have to fall further before they finally turn. We are told that the strong growth in the flow of remittance will contribute to furthering of domestic demand, said the finance ministry document.
Besides, the increased public expenditure under the annual development programme, the implementation of mega projects and increased investment owing to setting up of economic zones will have positive impact on the macroeconomic indicators. As a result, the GDP growth rate will maintain the current momentum. However, there are many more issues that should be taken into consideration to safeguard Bangladesh’s from the grip the pandemic.
China is the biggest trading partner of Bangladesh and the biggest source for raw materials. The world's second largest economy accounted for more than a fifth of the country's imports of $56 billion in fiscal 2018-19. No doubt, the barriers to imports from China, the epicentre of the virus, will hurt the export-oriented sectors and disrupt the supply chain. At the same time, it will have a negative impact on inflation.
Already the quarantines and other compulsory measures aimed at containing the disease are severely handicapping the Chinese economy, with knock-on effects elsewhere in Asia. Wuhan, for example, is the capital of Hubei Province, one of China's industrial centres. Leading Japanese carmakers Honda and Nissan have factories there, as do several of their European rivals. Producers of car parts, electronic components, and industrial equipment also have important manufacturing facilities in the region. Many of these factories have had to halt production, because their employees have been unable to return after the Chinese New Year holiday. These shutdowns constitute a major shock to global companies' supply chains across Asia including Bangladesh.
We know that a good number of Chinese nationals are working on several mega projects including Padma Bridge and Payra Power Plant in Bangladesh. It is envisaged that if the coronavirus situation does not recover early enough, then it will cause a halt of these megaprojects. Meanwhile, the coronavirus outbreak has impeded the commercial commissioning of Payra Power Plant in Patuakhali. The Bangladesh-China Power Company Limited, which is implementing the country's largest coal-fired project and concern authority can’t say for sure when it will be able to commission the project. Besides these mega projects a lot of Chinese money is invested in our country in various trade deals. We need to make sure those investments are protected for our own interests.
Most of the important construction materials are also sourced from China and majority of the suppliers are based in Hubei Province. As a result, the regular flow of imports of construction materials has been interrupted as many Chinese factories have closed their operations and the number of import vessels has dropped.
In this critical situation, our manufactures are in deep fear as to when China may reopen completely. Many Chinese companies might miss the lead time to ship goods on time and that will certainly harm our local industries. However, as most of our industries (garments, steel, cement, plastic, electronics, food and medicine) import raw materials from different areas of China, alternative sources should be actively considered in no time.
Sayeed Hossain Shuvro is Editorial Assistant, Bangladesh Post