Will the pandemic derail Bangladesh's economic growth?

Bangladesh has been a major beneficiary of globalization. The country has benefitted from the outsourcing of production to places where it can be done in a more cost-effective way. The ready-made garments (RMG) industry is labor intensive and labor is available in Bangladesh in abundance at a cheap price. The abundance of labor has also made Bangladesh a major labor exporting country, bringing valuable foreign exchange.

It also helps in the balance of payment situation. The political stability in Bangladesh in the last decade and propitious circumstances brought on by globalization has resulted in very fast economic growth in the country. Bangladesh's GDP growth in last few years has averaged around 8 percent. This was happening at a time when economic growth in rest of the world was slowing down. However, this fast economic growth has been disrupted by the outbreak of the COVID-19 pandemic.

The RMG industry and remittances from overseas workers are the two biggest contributors to Bangladesh's foreign exchange reserve. Manufacture and export of RMG contributes 13 percent to the GDP of the country. It employs nearly 4 million workers. It is estimated that out of this 1 million workers are already unemployed.

For the RMG industry, major export destinations include the United States, U.K., Germany, France, and Italy. However, garment stores in these countries are now shut. People have already limited their discretionary spending. Exporters in Bangladesh are now not getting their payments on time. Buyers are cancelling or modifying...