Unnayan Onneshan (UO), an independent multidisciplinary think-tank, observed that the proposed budget lacks measures necessary to address the macroeconomic, medium term and institutional challenges facing the economy at the advent of a pandemic while the expected growth rate of 8.2 per cent might be deemed unrealistic.
“In the wake of a global pandemic that has overturned the historical legacy of trends in macroeconomic indicators for the first time in decades, the budget of FY 2020-21 … still remains abundantly in the spectrum of exclusion and short-sighted motivations, and in favour of clientelist networks”, the independent multidisciplinary think-tank said in its report titled “Whither Bending the Curves for life and livelihood: A Rapid Assessment of National Budget 2020-21.”
It said that income erosion resulting from the losses in various productive sectors from the shutdown will lead to the emergence of a ‘new’ poor in the country.
According to the research organization, the income erosion may result in 43.5 percent households having income less than the international poverty line.
“In the worst case scenario, with prolonged shutdown, we estimate 47.43 percent of the households will have income below the poverty line. Systematic reopening up the economy with focus on job creation and retention will see the percentage come down to 39.43 percent,” the report adds.
For the first time in decades, UO said that macroeconomic indicators in Bangladesh are set to dramatically reverse their course – what had been a gradual decline in poverty since 1992 is about to take off in an upward direction, economic growth is stalled to 5.2 percent, the lowest since 1980, unemployment figures almost double since 2018 reaching an all-time high since 1984.
Pointing out that the inequality may further be entrenched, research organisation said that it would cross the fault line 0.50 from the existing 0.32 in terms of Gini coefficient while further exacerbate if measured by Palma ratio of 2.93 as there would be descent of low and middle-income section as new poor due to differentiated returns on labour and capital stemming from erosion of income, given the preponderance of most of the labour force to be engaged in informal sector and a ubiquitous loss of employment in both formal and informal sectors.
Unnayan Onneshan estimates that a percentage decrease in the GDP growth will result in 0.93 percent increase in unemployment rate. Hence, the unemployment rate may rise more than 3 percent because of the fall in GDP.
Unnayan Onneshan finds that the expected growth rate of 8.2 per cent proposed in the budget, reflected by a quick recovery from the current fiscal year’s 5.2 per cent may be deemed unrealistic.
The growth in GDP will in fact plummet due to added weakening of investment, consumption, government expenditure and net exports, stemming from the pandemic, it adds.
“The losses incurred by specific productive sectors shows a 12.4 percent drop in the overall contribution of these sectors in the GDP. As their total weight in the GDP is 31.44 percent, a 12.4 percent drop in their contribution will mean a 3.9% fall in the total GDP,” the report notes.
