Originally published in The Daily Star on 8 March 2020
Bangladesh’s gross domestic product may contract by as much as 1.1 per cent in the hypothetical worst-case scenario of a significant outbreak of coronavirus in the country, said the Asian Development Bank (ADB) in an analysis.
That means, the novel virus, which is yet to arrive in Bangladesh, could wipe $3.02 billion off the $300 billion-plus economy.
In such a scenario, 894,930 jobs will be lost, according to the ADB.
The ongoing COVID-19 outbreak affects China and other developing Asian economies through numerous channels, including sharp decline in domestic demand, lower tourism and business travel, trade and production linkages, supply disruptions and health effects.
The magnitude of the economic impact will depend on how the outbreak evolves, which remains highly uncertain, the Manila-based lender said.
The world’s second largest economy is also emerging as an export destination for Bangladesh.
Bangladesh receives 5-6 lakh tourists every year and of them a major portion comes from China.
“There are many uncertainties about the COVID-19, including its economic impact,” said ADB Chief Economist Yasuyuki Sawada in a statement.
This requires the use of multiple scenarios to provide a clearer picture of potential losses.
“We hope this analysis can support governments as they prepare clear and decisive responses to mitigate the human and economic impacts of this outbreak,” he added.
The new coronavirus disease, now known as COVID-19, was first identified in Wuhan, in China in early January. Since then, it has spread to another 88 countries as of Friday, according to the World Health Organisation.
The ADB analysis explored three scenarios given the very large uncertainties.
In the best-case scenario, the outbreak is contained relatively quickly, with travel bans and precautionary behaviour abating after two months, when the outbreak intensified and quarantines as well as travel and other restrictions were imposed.
In the moderate scenario, the outbreak is more widespread and lasts longer, with travel bans and precautionary behaviour abating only after three months; there is a larger decline in China’s consumption growth of 2 percentage points for the year, relative to a no-outbreak scenario.
In the worse-case scenario, the outbreak is even more protracted, with precautionary behaviour and restrictive policies remaining in place for six months; there is a large decline in both consumption and investment growth in China, with both down by 2 percentage points relative to a no-outbreak scenario.
In the hypothetical worst-case scenario, the duration of travel bans and sharp decline in domestic demand will be six months in China and the outbreak in other developing economies lasting three months.
In such cases, there will be 2 percentage points decline in China’s consumption relative to no-outbreak scenario, China’s investment relative to no-outbreak scenario and decline in selected developing economies’ domestic consumption.
In the best case scenario, the country’s GDP will lose $8.37 million and there will also be job cuts for 1,870 people. In the moderate and worse cases, there will be GDP loss of $15.84 million and $30.31 million and job cuts of 3,790 and 6,950 respectively.
“These should not be interpreted as a prediction that an outbreak will occur in any of these economies. In most of these economies there are very few cases of the COVID-19,” the ADB said.
Rather, they are meant to guide policy-makers in determining how costly an outbreak could be, so they can properly evaluate the benefits and costs of prevention and early response.
In Bangladesh, tourism revenues will decline by 0.001 per cent in the best-case scenario, 0.002 per cent in the moderate case scenario and 0.003 per cent in the worst-case scenario.
The range of scenarios explored by the ADB suggest a global impact of $77 billion to $347 billion, or 0.1 per cent to 0.4 per cent of global GDP, with a moderate case estimate of $156 billion or 0.2 per cent of global GDP.
Two-thirds of the impact falls on China.
The magnitude of the impact of the lethal, pneumonia-like virus, which is sweeping the globe, on Bangladesh’s international trade of Bangladesh as well as overall commerce — cannot be ascertained yet.
In fact, the real impact would be clear in March, the finance ministry of Bangladesh said in a document recently.
“There is no doubt that there will be at least short-term impact. And if the outbreak persists for a long time, this will have far-reaching impact not only on Bangladesh but also on the global economy.”
The barriers to imports from China, the epicentre of the virus, will hurt the export-oriented sectors and disrupt the supply chain, the finance ministry said, adding that the overall trade may be affected to some extent because of the coronavirus.