Macro Assignment

POSSIBLE IMPACT OF CORONAVIRUS (COVID-19) ON THE
ECONOMY OF BANGLADESH
Prepared for:
Professor Dr. Abdul Bayesl
Course Instructor: Financial Management
Course Code: MBA-510
Prepared by:
Joy Kumar Saha
ID# 2018-3-95-038
MBA Program
East West University

April 29, 2020
Definition of Microeconomics:
Microeconomics is the study of individuals, households and firms' behavior in decision making
and allocation of resources. It generally applies to markets of goods and services and deals with
individual and economic issues.
Roughly speaking, microeconomics deals with economic decisions made at a low, or micro, level
as opposed to macroeconomics which approaches economics from a macro level. From this
standpoint, microeconomics is sometimes considered the starting point for the study of
macroeconomics as it takes a more "bottom-up" approach to analyzing and understanding the
economy.
Structure of Microeconomics:
Novel Coronavirus:
Coronavirus disease 2019 (COVID-19) is an infectious disease caused by severe acute

respiratory syndrome coronavirus 2 (SARS-CoV-2). The disease was first identified in
December 2019 in Wuhan, the capital of China's Hubei province, and has since spread globally,
resulting in the ongoing 2019–20 coronavirus pandemic. As of 29 April 2020, more than 3.11
million cases have been reported across 185 countries and territories, resulting in more than
217,000 deaths. More than 932,000 people have recovered.
Common symptoms include fever, cough, fatigue, shortness of breath and loss of smell. While

the majority of cases result in mild symptoms, some progress to viral pneumonia, multi-organ
failure, or cytokine storm. More concerning symptoms include difficulty breathing, persistent
chest pain, confusion, difficulty waking, and bluish skin. The time from exposure to onset of
symptoms is typically around five days but may range from two to fourteen days.
Possible Impact of CoronaVirus on Bangladesh Economy:
The world is experiencing another time by characterizing an economic rescission due to COVID-
19 Outbreak and its pandemic and as a member of this world Bangladesh is not out of that, So,
there is no scope to think out of box in this terrific time moreover Bangladesh needs to identify
and capture all major challenges and to be figure out way to overcome those gigantic challenges
by applying strategically, systematically within shortest time.
If we look about the outlook of Bangladesh economy in the last two decades where
macroeconomic stability was significant and comparatively sustainable because of high rate of
GDP growth by RMG export and returning remittance by booming international labor market
through Bangladeshi semi-skilled and unskilled labor.Covid-19, however, has exposed the
vulnerability of these cross-country supply chains, with negative consequences for Bangladesh.
 The 2 R’s: RMG & Remittances: (RMG) Ready-made Garments (RMG) companies
that buy from Bangladesh are literally closing doors all over European and American
cities. Stores have closed for H&M, GAP, Zara, Marks & Spencer, Primark, which are all
major buyers. Shopping has come to a standstill as people avoid discretionary spending.
There is also a measure of panic regarding raw materials sourced from China This is not
surprising because slowdown in US and EU economies have had ripple effects in the
Bangladesh economy. This correlation is most evident for the global financial crisis in
2008, when Bangladeshi GDP growth curve mirrors those of the US and EU, albeit the
drop off was less severe than for the developed economies. Insiders interviewed suggest
that if the virus continues to impact global supply chains, buyer demand, and of course,
health and safety of workers, by Q4 2020, loss in export revenues could reach US$ 4.0
billion.
 Remittances: History shows that falling oil prices have a lagged effect on remittances
into Bangladesh. At present, prices are falling because of reduced demand from sectors
such as aviation and transportation sectors, as well as the Russia-Saudi Arabia price war.
Overall, the drop in export revenues, RMG worker layoffs, and reduced flow of
remittances will impact demand in the urban and rural consumer economy of Bangladesh.
 Impact on Consumer Demand: According to the latest reports, scores of RMG factories
are shutting down and workers are going back to the villages. This creates pressure on the
rural economy at a time when urban-rural economic linkages have also been severely
disrupted. To speak of the urban economy, malls have been closed from 25 March, as per
directive of the Bangladesh Shop Owners Association. Only kitchen markets, grocers’
shops, shops selling daily essential commodities and pharmacies have been allowed to
stay open.
 Overall, the current economic situation may seriously undermine the livelihood of the
underprivileged cohort of the population.
 The effect of Covid-19 will be worse for people who are dependent on daily wages and
low-income groups. Lack of access to basic healthcare, knowledge of hygiene and a
social safety net have always been a challenge for this cohort and the pandemic is likely
to increase these challenges, exponentially.
 Challenges for the Financial Sector: Covid-19 catches the Bangladesh financial sector
at an inopportune time. Banks were trying to come to terms with the Ministry of Finance
directive of 6% and 9% caps to interest rates on deposits and loans; vulnerable asset
quality; moribund capital markets; and a struggling microfinance sector as access to
donor funds and bank financing became more competitive. Moreover, the central bank is
buying dollars from commercial banks, with the intention of curbing taka’s appreciation
against the dollar, has provided guidance on provisions for rescheduled loans, and
instructed banks to extend tenure to realize export proceeds, while allowing importers
time to make import payments. Once the current risks of infection subside, quantitative
easing is expected to encourage banks to seek out investment opportunities. Whenever
this happens, some of this liquidity may also find its way into the stock market.
Therefore, while markets are falling, and it is of course, never possible to time a market
bottom, there are fundamentally strong equities trading at historically low prices at
present.
 Impact on Small Businesses and Startups: At times of economic turmoil, small
businesses and startups are usually the worst hit. Raising funds is difficult as it is, for
small businesses and startups. For Bangladeshi startups, although the ecosystem is at an
early stage, with a handful of startups responsible for a lion share of funds raised, Covid-
19 has had adverse consequences. Fundraising for startups is difficult even in a healthy
economy. At the time of the coronavirus, when public equities are being deemed risky
and even gold prices have been shaky, startup investing will likely take a considerable hit
in the coming months.
 Beside the IT sector: The IT sector also helps a bit ahead to be continued economic
growth of Bangladesh while there is a lot of scope to improve.
 On the other hand export dependency: Is a very significant area of Bangladesh
economy where China is one of the key players but this Chinese dependency must be
reduced and or to identify more alternative sources as well as needs to develop/increase
self-dependency.
As per the prime ministers bailout plan, fiscal actions included stimulus packages e.g. direct
financial support for the affected sectors, widening social safety net coverage for poor people,
food distribution at a lower price among the poor people, as well as increasing monetary
supply. The monetary actions would be lowering the repo rate and reduction of the Cash Reserve
Ratio (CRR) to increase the money supply to the economy.

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POSSIBLE IMPACT OF CORONAVIRUS (COVID-19) ON THE

East West University

Coronavirus disease 2019 (COVID-19) is an infectious disease caused by severe acute

Common symptoms include fever, cough, fatigue, shortness of breath and loss of smell. While

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