QUARTERLY BUSINESS REVIEW

VOLUME: 11 ISSUE: 02
APRIL-JUNE 2020

Impacts of COVID-19
on the Bangladesh Economy
 MTBiz
QUARTERLY BUSINESS REVIEW
VOLUME: 11 ISSUE: 02
APRIL-JUNE 2020

Contents
Article of the month 02
Impacts of COVID-19
National News
on the Bangladesh Economy
The Central Bank 06
Business & Economy 08
MTB News & Events 12
Industry Appointments 16

International

Economic Forecast 19
Future Products 23
Financial Glossary 24

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ARTICLE OF THE MONTH

Impacts of COVID-19 on the Bangladesh Economy

The novel coronavirus has already caused deadly havoc Bangladesh’s Apparel Industry
in the world, affecting more than 208 countries and the The performance of the RMG sector is more critical for
spread is still on the rise, significantly affecting the an economy like Bangladesh, since apparel contributes
global economy. Bangladesh being forced through 84% of the country’s export, employing close to 3.5
lockdown until end of May has seen a crippling effect million people.
on workers and businesses across the country. The
The apparel sector exported merely around USD 360
economy almost came to a standstill and debilitating
million during April. A stark comparison, as at the same
effects are being observed in almost all sectors.
time last year, Bangladesh exported around USD 2.42
Around 34 million people, or 20.5 percent of the billion. Bangladesh Garment Manufacturers and
population, live below the poverty line in Bangladesh, Exporters Association (BGMEA) revealed this recently
according to Bangladesh Bureau of Statistics (BBS) data. analyzing the data of the National Board of Revenue
An analysis by Dhaka-based South Asian Network on (NBR).
Economic Modelling (SANEM) shows that this number
would rise by 36 million if the income level for poverty
line is raised by 1.25 percent. Many of them are likely to
fall into poverty trap due to the pandemic.
There are differing opinions on possible impacts of
Covid-19 on the Bangladesh economy. Both the World
Bank and the International Monetary Fund (IMF) have
expressed apprehensions about the economic growth
that may slide down to just over 2.0 percent during the
current fiscal year. The government still remains
optimistic about growth prospects. The Asian
Development Bank (ADB), forecasts that Bangladesh's
BGMEA said a huge amount of orders are canceled or
economic recovery from the coronavirus-induced
on hold due to the global Coronavirus outbreak. The
downturn would be V-shaped. In its Asian Development
apparel export from Bangladesh has been witnessing a
Outlook Supplement, unveiled on June 18, ADB said decline since March. And in April it witnessed the
that the country would grow at 7.5 percent next fiscal biggest fall in its history. As per the latest data of
year that begins on July 1, helped by strong BGMEA, 1150 garment factories lost 98 million pieces
manufacturing. of garments order which is equivalent to USD 3.18
Bangladesh's GDP growth, which has averaged around billion.
8 percent during the past few years, has been disrupted Bangladesh's single-month shipments in May declined
by the outbreak of Covid-19. The reported number of by about 62 percent to USD 1.4 billion as Covid-19
unemployed people now ranges from 10 million to 15 outbreak has disrupted the global supply chain
million, compared to 2.7 million in 2017. Economic severely. Export earnings during July-May of the FY
growth in Bangladesh, until the beginning of the 2019-20 declined by 18 percent to USD 30.95 billion,
pandemic, has been helped largely by four major which was USD 37.75 billion a year ago, according to
drivers of growth—export earnings, especially from the the data of Export Promotion Bureau (EPB).
ready-made garments (RMG) industry, remittances sent SME Sector of Bangladesh
by migrant workers, growth in the agricultural sector,
and expansion in cottage, micro, small and medium SMEs are the bloodline of Bangladesh’s economy
creating employment for 7.8 million people directly and
enterprises (CMSMEs).
providing a livelihood for 31.2 million in total. One of
However, damages to the Bangladesh economy will the hardest hit by COVID-19 pandemic is the already
depend largely on duration and pervasiveness of vulnerable SMEs due to dependence on a shorter cash
Covid-19, as well as effectiveness of government cycle, supply chain disruption, and loss of sales.
measures to tackle the pandemic.
The contribution of the SMEs to the GDP is 20.25
percent in Bangladesh. The sector accounts for 35.49

02 MTBiz
 ARTICLE OF THE MONTH

percent of the All major economic segments of the country will face
HOW CAN THE GOVERNMENT
HELP THE ECONOMY?
total employment deep trouble this year due to the ongoing economic
The government can take four measures roughly
in Bangladesh, fallout brought on by the coronavirus pandemic,
to procure the required fund to address the
current issues of Bangladesh Economy
according to a according to a recent central bank report.
The government can procure a fund of
study conducted "Undoubtedly, the year 2020 would be critical and
$1.5BN of the global fund of $50BN
formed by world organizations for
by the challenging for all of us. The stimulus packages alone
fighting the global pandemic I n t e r n a ti o n a l may not suffice to address all sorts of damages made by
The government can ask for soft loans at easy terms from the
World Bank, ADB, IMF, IDB
C o o p e r a ti o n COVID-19 on our economy," said Fazle Kabir, governor
Organization for of the central bank, at the central bank's annual
Small and Medium "Financial Stability Report" for 2019, released on June
The government may impose wealth tax
on the High Net Worth Individuals/ Enterprises in Asia 30. He added, despite the recent improvement, proper
Businesses and procure a handful of fund
(ICOSA), Japan. monitoring of
The government may take urgent
stesteps of bringing funds from the rescheduled loans PRIVATE SECTOR CREDIT GROWTH IN APRIL 2020
Foreign Banks of the Bangladeshi Therefore, the
nationals who have looted from different amid the Credit growth increased to Industry insiders say the
SMEs cannot be
banks/financial institutions and deposited 8.82% in April from a historic growth was mostly accounted
the fund in different countries including Canada, USA, Malaysia, pandemic will be a low of 8.20% in March for by forced loans as many

avoided if the
Switzerland, Australia, Singapore and many other countries
importers failed to make
repayment due to
critical challenge worldwide supply
government seeks disruption
for the banking amid the
to meet the targets of the sustainable development pandemic

industry. The Export earning saw a steep The total loan to the private
goals, in terms of employment and contribution to the
ongoing economic 83% fall year-on-year in April sector stood at
GDP. The true potentials of Bangladesh lie in SMEs and when imports fell by 62% TK10.75 trillion
at the end of April
meltdown could
therefore the sector should get more emphasis for the
severely affect the
sustainable growth and development of the country.
d e b t - s e r v i c i n g Government borrowing jumped to 79%
in April from 44.60% in March
Banking sector capacity of the Trend of Private Sector Credit Growth
While all business activities were in a standstill in April borrowers and the figure in %

amid a countrywide coronavirus shutdown, the banking performance of

sector saw an improvement in private sector credit the rescheduled as
growth after a six-month downward trend. In April, well as regular Sep’19 Oct’19 Nov’19 Dec’19 Jan’20 Feb’20 Mar’20 Apr’20
credit growth increased to 8.82 percent from a historic loans might be SOURCE: BANGLADESH BANK

low of 8.20 percent in the previous month, according to hampered. The

Bangladesh Bank (BB) data. Government borrowing deposit growth in the banking sector, however, might
jumped to 79 percent in April from 44.60 percent in the decline soon due to the impact of the coronavirus
previous month, according to BB data. outbreak. This might happen due to weaker economic
activities accompanied by lower demand for labour in
In April, export and import fell drastically and the remittance-originating countries. Bedsides,
businessmen were unable to make their payments for demand for holding excess cash may also increase due
LC. Export earnings saw a steep 83 percent fall to uncertainty associated with the pandemic.
year-on-year in April when imports fell by 62 percent.
The total loan to the private sector stood at BDT Forex reserves cross USD 34 billion for the first time
10,75,110 crore at the end of April. The country's foreign exchange reserves crossed the
In April, the banks' excess liquidity surged by BDT USD 34-billion mark for the first time. Amid coronavirus
24,000 crore and reached a whopping BDT 1,13,000 pandemic, foreign trade became slower and the aid of
crore. The Bangladesh Bank, too, for the first time in its developing partners started to arrive, so the foreign
history, created new money worth BDT 70,794 crore exchange reserves piled up. According to the central
within a short time after the outbreak of Covid-19 in bank, country's foreign exchange reserves rose to USD
March to provide liquidity support to the banks. The 34.23 billion on June 3. Earlier, the previous highest
liquidity position of the banks stood at 6.5 percent of reserves were recorded on September 5 in 2017- the
GDP. While the banking sector is sitting over so much amount was USD 33.68 billion. Remittance is the key
surplus cash, credit flow to the private sector hit the driver to raise the reserve to this highest point. From
lowest growth at 8 percent in the last two months – July 1, 2019 to June 2 this year, total remittance stood at
March and April. However, the government is on a USD 16.5 billion, which was 10 percent higher than the
borrowing spree from banks during this period. Its amount of same period of the previous fiscal year.
borrowing has already crossed the fiscal target in April.
In the 10 months of the current fiscal year, the
government borrowed around BDT 54,000 crore
against the fiscal target of BDT 47,850 crore.
03 MTBiz
ARTICLE OF THE MONTH

Remittance subscriber base, left the mobile networks in

March-May, which the sector people term a rare
REMITTANCE FALL IN RECENT MONTHS
Remittance
phenomenon. As of May, there are 16.15 crore active
inflow saw
$1.5BN received 34% fall in remittance 8.72% total remittance
connections of all four carriers, which was 16.61 crore
in May 2020; growth in April growth in first 11 months
a 14
$1.74BN in of FY20, reaching
at the end of February, according to the latest report of
May 2019 $16.36BN
percent fall
the Bangladesh Telecommunication Regulatory
in May
$33.46BN in foreign $2.64BN widening of $732M approved by IMF Commission (BTRC) published. Industry insiders
exchange reserve current account deficit to help Bangladesh co m p a re d
in Jul-Mar FY20; address estimate that active connections might have gone
$2.15BN in July-Feb challenges to the same
posed by down further to 16 crore in June. Though the number of
Covid-19 month last
active SIMs has fallen, internet connections have
year (2019)
increased both in mobile and broadband segments
as many migrant workers lost their jobs to the global
during the pandemic. At the beginning of March, active
economic crisis caused by Covid-19. However, in
internet connections were a few thousand less than 10
2018-19 fiscal, the country received 16.42 billion
crore and at the end of May, the number crossed 10.21
dollars in remittance. Compared to 2018-19, remittance
crore.
increased by 10.86 percent in 2019-20 fiscal year.
Month-wise, the highest remittance in the country's e-Commerce
history arrived in June (2020) which was 1,833 million e-commerce businesses are anticipating a silver lining
dollar. The second highest 1,748 million dollar from the Covid-19 shutdown as a significant number of
remittance came in June, 2019. International customers are now more inclined towards ordering
Organisation for Migration (IOM) Bangladesh in a online than ever before, which might boost the industry
recent statement said, "Due to the economic and in the post-pandemic period. According to industry
labour crisis created by the Covid-19 pandemic, sources, the sales of products through digital platforms
hundreds of thousands of migrant workers are – such as apps and Facebook pages – increased
expected to return by the end of the year." manifold. Health-related items – such as hand sanitizer
Pharma Sector or masks – witnessed about 200% increase in sales in
the last few weeks, and the demand is greater outside
There are 273 listed Pharmaceuticals companies in the
Dhaka, industry insiders added. According to the
country. Of them, 217 are in operation right now. In
E-Commerce Association of Bangladesh (E-CAB), about
2019, sales of medicines in the local market were BDT
100 e-commerce businesses – mostly with product
22 thousand crore. After meeting domestic demand,
lines of essential commodities, groceries and medicine
medicines amounting to BDT 1,108 crore were
– are witnessing a jump in business as people are
exported to different countries. The pharmaceutical
bound to order online due to the shutdown. While
industry's annual growth is 15 percent. There are 1.25
according to a recent survey by the E-CAB, the
lakh registered, and around 18 thousand unregistered,
e-commerce industry could face around BDT 3,480
pharmacies in the country. Although all the drug stores
crore operational and inventory losses amid the novel
are open following the government's directive, sales of
coronavirus shutdown. The study, titled "Impact of
most shops have declined at this time of coronavirus
Covid-19 on E-commerce Industry of Bangladesh,"
shutdown. The supply of drugs also dropped during the
showed that, financially, 82 percent of the e-commerce
time.
firms have been severely impacted by the shutdown.
Mobile Handsets & Active Subscribers
ICT Sector
The sale of feature phones and smartphones was
ICT sector earned USD 1 billion by exporting software
almost zero in April due to the countrywide shutdown
and ICT products last year. But this year, 70%-80% of
since March 26. As per the latest data of the
global work orders were canceled due to the pandemic
Bangladesh Telecommunication Regulatory
and the subsequent countrywide shutdown. Around
Commission (BTRC), in 2019 the number of locally
USD 800 million equivalent of international work
assembled smartphones increased to 20 lakh, from 7
orders, as well as USD 500 million worth of domestic
lakh the previous year. In contrast, the number of
work orders were canceled. Recently, due to
smartphone import fell to 9.67 lakh last year, from
work-from-home (WFH) policy adopted by some of the
24.44 lakh the previous year. Mobile phone operators
corporate business houses, there is a rise in the use of
are struggling to retain their active subscribers. More
online meetings. Further, many businesses are focusing
than 46 lakh active users, or 2.77 percent of the total
to shift to cloud computing.

04 MTBiz
 ARTICLE OF THE MONTH
Coronavirus bites into VAT collection
As economic activities came to a grinding halt amid the coronavirus outbreak, VAT collection fell by a staggering BDT 6,500
crore in April, the National Board of Revenue (NBR) said. Because of the pandemic, and subsequent fall in trade, about
28,000 businesses and organisations failed to file VAT returns within the stipulated May 15 deadline. According to NBR,
about 70,000 organisations submit VAT returns in normal times but only 42,600 returns were filed by the May deadline. This
also caused a drastic fall in VAT.
Government Stimulus Packages in COVID-19
The Covid-19 pandemic has forced the economic activities of the world to come at a halt. To save the world from a
devastating recession, different countries are announcing stimulus packages for various sectors. As of April 15th, the
Government of Bangladesh has introduced stimulus packages of a total of BDT 1,000 billion which is 3.3% of the total GDP.
Understanding The Stimulus Packages of Bangladesh
The major packages have been discussed in the table below.

Package Amount
Beneficiary Fund Sourcing Cost of Fund
Number (BDT crores)
Industries and Service-sectors as As loans from 4.5% by the beneficiary and
1 30,000 working capital loans commercial banks 4.5% by the government
as subsidy
Cottage, micro, small and medium As loans from 4% by the beneficiary and
2 20,000 enterprises (CMSMEs) as working commercial banks 5% by the government
capital loans as subsidy
To facilitate raw material imports Bangladesh Bank Export
3 12,750 2%
under back-to-back LCs Development Fund
Pre-shipment Credit Refinance Scheme
Bangladesh Bank 7%
4 5,000 for local products alongside
the export sector
Source: The Business Standard
Apart from these there have been announcements of insurance schemes for healthcare workers and ration cards for
vulnerable families.
Financing of the Stimulus Packages
It is evident from these packages that their main purpose is to assist in different industries so that they are not devastated
by the Covid-19 lockdowns. It can be seen that the fund is being financed jointly by commercial banks and the Bangladesh
Bank. Bangladesh Bank reduced the repo rate to 5.75% from 6%. The Bangladesh Bank also cut the Cash Reserve Ratio (CRR)
to 5% which injected about BDT 64 billion to the economy. However, the Association of Bankers deemed this to not be
enough to obtain the necessary liquidity and asked the Bangladesh Bank to reduce the repo rate to 5%, the Cash Reserve
Ratio to 4.25 and the Statutory Liquidity Ratio (SLR) to 11% from 13%.
World Bank proposes USD 300 million for credit guarantee scheme
The World Bank has proposed USD 300 million to the Bangladesh Bank as support for forming a credit guarantee scheme to
speed up lending by banks in high-risk sectors, especially to SMEs, during the pandemic. According to the initial
implementation plan, the credit guarantee will not be given on individual loans, rather it will be given on a bank's portfolio
based on risk measurement. Small, micro and cottage industries will mainly be entitled to get credit guarantee support.
Banks will have to pay a price for availing such guarantee schemes similar to insurance premiums. The demand for a credit
guarantee scheme came from bankers after the government announced two stimulus packages – one for the industrial and
service sector worth BDT 30,000 crore and another for SMEs worth BDT 20,000 crore – to support affected businesses.
Way to recovery
Damages to the economy of Bangladesh will depend largely on the duration and pervasiveness of Covid-19, as well as the
effectiveness of government measures to tackle the pandemic. Next, the assumptions behind a V-shaped recovery are,
quick recovery in domestic consumption in the US and Europe, the two main destinations of major Bangladeshi exports,
consistency, and growth of Bangladeshi migrant workers’ employment, an upward pull of oil price in Arab countries, among
the external factors while, rise in steady domestic consumption, quick recovery of CMSMEs and informal sectors are the
major domestic factors. In line with the above, a set of dynamic fiscal and monetary policy will be required from the
government’s side to provide an environment conducive to recovery.

05 MTBiz
THE CENTRAL BANK

NATIONAL NEWS
BB almost doubles funding for SMEs’ refinance schemes Pandemic to cause an economic whiplash: BB
The central "Undoubtedly ,
bank has almost the year 2020
doubled the would be
volume of critical and
funding of three challenging for
refi n a n c e all of us. The
schemes for s ti m u l u s
small and packages alone
m e d i u m may not suffice to address all sorts of damages made by
enterprises (SMEs) in order to protect the marginal COVID-19 on our economy," said Fazle Kabir, governor
entrepreneurs from the ongoing economic fallout from of the central bank. All major economic segments of
the coronavirus pandemic. The interest rate on the the country will face deep trouble this year due to the
schemes was also decreased by 2 percent both for ongoing economic fallout brought on by the
banks and borrowers, according to a central bank coronavirus pandemic, according to a central bank
circular sent out to all lenders. Under the latest report. Although the government had set a GDP growth
programme, the refinance scheme for small enterprises target of 8.20 per cent for this fiscal year citing a
now stands at BDT 1,500 crore, up from BDT 850 crore. V-shaped recovery, the central bank's projections have
The other two schemes, which provide fund to set up given an indication the economy may face deep trouble
agro-based product processing industries in rural areas in the days ahead. The government has so far
and for new entrepreneurs in cottage, micro and small announced several stimulus packages worth BDT
enterprises, have been increased to BDT 1,400 crore 103,117 crore, which is nearly 3.7 percent of the
country's gross domestic product, to cushion the
and BDT 100 crore from BDT 700 crore and BDT 50
possible economic shocks from the global coronavirus
crore. Lenders will get the fund from the central bank at
pandemic. The economic whiplash by the rogue virus
3 percent interest rate, but they will be allowed to
across the globe is likely to affect the domestic
disburse the loans at seven percent interest rate to
economy considerably in the coming days.
borrowers. Under the refinance scheme, banks at first
disburse loans to clients, after which the central bank Non-bank entities to provide ATM service
reimburses the fund to them. The BB has
Nagad gets BB permission for mobile banking allowed non-bank
entities to operate
After more than
automated teller
one year of
machines (ATMs)
operation as a
across the country
digital wing of the
with a focus on
Bangladesh Post
increasing the
Office, Nagad has
banking network in rural areas at an affordable cost. To
r e c e i v e d
this end, the central bank's payment systems
permission to operate as a full-fledged mobile financial
department, issued Guidelines for White Label ATM
services (MFS) provider like bKash and Rocket.
and Merchant Acquiring Services. ATMs set up, owned
Bangladesh Bank has issued Nagad a licence for an
and operated by non-bank entities are called White
interim period of six months, said a senior official at the
Label ATMs. To bring unbanked people under financial
payment systems department of the central bank.
services, the Bangladesh Bank issued this guidelines. A
Nagad has 150,000 outlets and a strong presence at
White Label ATM and Merchant Acquiring Services
10,000 post office branches across the country. On April
licencee will have to install three ATMs in rural areas if
6, the central bank asked banks to open MFS accounts
it installs one ATM booth in an urban area.
for the workers and labourers who have no accounts,
by April 20, so that they can receive their wages and
allowances during the countrywide shutdown to curb
the novel coronavirus spread.

06 MTBiz
 THE CENTRAL BANK

NATIONAL NEWS
Private sector credit growth marks historic 8.2% low in BB sells USD 822m to banks in FY20
March In the fiscal year
Private sector credit 2019-20, from July 1
growth, which has to May 20, the
been slowing down Bangladesh Bank
since the beginning sold USD 822 million
of the current fiscal to banks from its
year amid pressure foreign currency
reserve. It sold USD 10 million to some state-owned
of interest rate capping, dropped to a historic low at
banks to make letter of credit (LC) payments on behalf
8.20 percent year-on-year in March, posing huge risks
of the Bangladesh Petroleum Corporation for importing
for employment and economic growth. Despite having
liquified natural gas. After selling USD 10 million, the
huge amounts of excess liquidity, banks were reluctant reserve of the Bangladesh Bank stood at USD 33.19
to lend amid the pressure of implementing single digit billion as the Asian Development Bank's budgetary
lending rate, which came into effect from April 1, said support of USD 250 million added to the reserve.
industry insiders. There was a lack of demand from
Forex reserves hit USD 35 billion for the first time
genuine businessmen due to a slowdown in the export
and import business amid the global economic crisis.
The credit growth in March was far below the monetary
target of 14.8 percent set for the fiscal year 2019-20 by
the Bangladesh Bank. In a recent report placed to the
International Monetary Fund (IMF), the Bangladesh
Bank expected private sector credit growth to end up at
8.5 percent by the end of the fiscal year.
BB introduces payment guarantee for exporters
Bangladesh Bank has introduced international The country’s foreign exchange reserves have set a new
factoring, a development that can be viewed as a mode record, hitting USD 35 billion for the first time in its
of accelerating the country's exports and reduce history. “The aid from developing partners and
exporters' risk of collecting their products' worth. The remittances have added up to raise the foreign
country's exporters currently have to undertake sales exchange reserve to USD 35.09 billion,” said Md Serajul
contracts without payment guarantees from foreign Islam, Bangladesh Bank Executive Director and
importers. As a result, exporters face the risk of spokesperson. “The money provided by IMF and loans
payment defaults by importers. From now on, banks for various projects from the World Bank, ADB, and JICA
dedicatedly running foreign exchange related is also the key factors behind the rise of the reserves to
businesses will be allowed to let exporters ship goods a new record,” he added. Policy Research Institute
on sales contracts under open account credit terms executive director Ahsan H Mansur, said: “The amount
within the statutory period, if otherwise not extended, of money that the Bangladeshi expatriates have sent
from the date of shipment. This means exports will be during this pandemic, is not of their recent income. “A
executed against payment undertaking or payment risk good number of migrant workers will lose their jobs and
coverage by international factoring companies or return to Bangladesh owing to the worldwide crisis
foreign banks for settlement of export bills. The policy is created by the Covid-19 pandemic in the coming days,”
a simplified version of financing under factoring and he added. The inflow of remittance declined by 14.01%
supply chain to exporters against their export with year on year to USD 1.50 billion in May as the
external payment undertaking. The costs by exporters coronavirus pandemic took a toll, as per central bank
against payment undertaking or payment risk coverage data. Former lead economist of World Bank,
and interest with relevant charges for early payment Bangladesh, Zahid Hussain said that the aids from our
shall not exceed a 6-month London Interbank Offer development partners and the decreasing trend of
Rate (LIBOR) plus 3.50 per cent annually, the notice import growth are the factors behind the new record in
our reserves but it is so difficult to sustain it.
said.

07 MTBiz
 BUSINESS & ECONOMY

NATIONAL NEWS
Budget passed amid pandemic DSE turnover crosses BDT 25b-mark on huge block
trade of GSK shares
The Jatiya Sangsad has
Daily trade
passed the BDT
turnover on
568,000-crore national
Dhaka Stock
budget for fiscal
Exchange
2020-21, with the theme
(DSE) crossed
"Economic Transition
BDT 25 billion-
and Pathway to
mark after
Progress," which,
nine and a half
according to experts,
years. Turnover, a crucial indicator of the market, stood
may prove difficult to
at BDT 25.43 billion on the country's premier bourse
implement amid the
which was BDT 683 million in the previous session. It
coronavirus pandemic. Earlier on June 11, Finance
happens to be the biggest single-day transaction in the
Minister AHM Mustafa Kamal placed the budget in the
past nine and a half years since December 6, 2010, when
House with an ambitious GDP growth target of 8.2
the turnover totalled a record BDT 27.10 billion. Market
percent, focusing on health sector development and
operators said the sudden jump in turnover came as a
economic recovery amid Covid-19 pandemic. The
surprise for capital market investors amid the prolonged
government has allocated BDT 103,117 crore for 19
bearish trend in the market. "Sales of entire shares of
stimulus packages to put the economy back on track
SETFIRST Ltd, one of the corporate directors of the GSK
amid daunting challenges posed by coronavirus
Bangladesh, to Unilever Overseas Holdings B.V on block
pandemic. The combined support accounts for 3.7
market at BDT 2,046.30 each, was the main reason
percent of the country's GDP. Of the amount, BDT 5,000
behind the sudden jump in turnover on DSE," said a
crore went to the export industry, BDT 20,000 crore to
merchant banker. The GSK Bangladesh accounted for
the micro, small and medium enterprises, BDT 30,000
87.9 per cent to the day's total turnover as 10.87 million
crore to large industries and services, and BDT 5,000
shares of the company worth BDT 22.25 billion changing
crore to the agriculture sector. The overall budget
hands in the block market.
deficit will be BDT 190,000 crore, which is 6 percent of
the GDP.
"As per the earlier disclosure, shares transaction of GSK
Jute mills under BJMC to be shut from July 01 Bangladesh executed on the block market through City
The state-owned Brokerage, maintaining all rules and regulations," said a
jute mills under high official of the GSK Bangladesh. As per the disclo-
Bangladesh Jute sure, Unilever Overseas Holdings B.V. purchased the
Mills Corporation entire holding of SETFIRST Ltd, which is more than 9.87
(BJMC) would be million or 81.98 per cent shares of the total number of
shut from July 01 shares of GSK Bangladesh. The GSK Bangladesh's shares
and reopened traded between BDT 2,046.30 and BDT 2,148.60, before
under public-private partnership (PPP) within next six closing at BDT 2,084.10.
months. Some 25,000 permanent workers of BJMC jute
mills will be given 'golden handshake' while dues and The GSK, one of the worlds's leading research-based
other retirement benefits of around 9,000 workers who pharmaceutical and healthcare companies, shut its
already retired would also be paid by September. Textile medicine manufacturing unit in Bangladesh in 2018 after
and Jute Minister Golam Dastagir Gazi made the six decades of operation, since listed on the Dhaka
disclosure at a virtual press briefing held recently. The bourse in 1976, due to incurring huge losses. The
minister said, "The BJMC jute mills have been incurring UK-based multinational company continued with its
losses over the last four decades except four years. consumer healthcare unit that produces Horlicks, Senso-
dyne and Glaxose-D in Bangladesh as the company
makes a healthy profit from this segment.

08 MTBiz
 BUSINESS & ECONOMY

NATIONAL NEWS
ADB boosts support for Bangladesh’s private sector Trade ties with China to enter new stage, says Chinese
ambassador
The Asian Development
Bank (ADB) has
expanded the Trade
Finance Programme
(TFP) to support the
private sector in
Bangladesh by raising
its financing limit to USD 755 million from USD 518
million at the end of last year. The TFP works with 12
partner banks in Bangladesh to mobilise private sector
capital and fill market gaps by providing guarantees and
loans to support trade, according to an ADB press Chinese Ambassador to Bangladesh Li Jiming said, with
release. Country Director Manmohan Parkash said, the implementation of 97% zero tariff treatment,
"Given the impact of Covid-19 on the economy – Bangladesh-China economic and trade cooperation will
particularly availability of credit for the private sector in definitely enter a significant new stage. Bangladesh can
Bangladesh – enhancement of the TFP will increase benefit hugely from the vast Chinese market as China's
liquidity, help boost businesses, raise exports and imports will exceed USD 30 trillion in next 15 years, says
imports, increase jobs, plus contribute to economic its ambassador Li Jiming in the capital recently. "It will
growth and development." Noting Bangladesh is one of be a win-win cooperation for China and Bangladesh to
the most active TFP countries, he said, "The programme fully explore China's import capability, catch up with the
has so far supported USD 814.6 million in trade, with demand of the Chinese market, and strengthen
70.7 percent co-financing by the private sector and over bilateral trade," he added. "It is estimated that in the
1,367 transactions, as of 31 December 2019." As trade next 15 years, China's imports will exceed USD 30
transactions typically start and end within 180 days, the trillion. China's import will continue to maintain great
USD 755 million can bankroll and support over USD 1 potential, providing a strong guarantee for China's
billion in Bangladesh trade year-over-year. economic development and a huge market for
high-quality products of Bangladesh," said the
IMF approves USD 732m to BD to address Covid-19 ambassador.
pandemic
Beximco exports 6.5 million PPE gowns to USA
The International
Beximco Group, a
Monetary Fund (IMF)
Bangladeshi corporate
has approved a
giant, has exported 6.5
disbursement of about
million Personal
USD 732 million to
Protective Equipment
Bangladesh for
(PPE) gowns to the USA.
addressing the
With this, Bangladesh joined the select group of
challenges posed by Covid-19 pandemic. The Executive
countries that manufacture world-class, large-scale PPE
Board of the IMF approved USD 244 million under the
to US brand Hanes for ultimate delivery to Federal
Rapid Credit Facility (RCF) and about USD 488 million
Emergency Management Agency (FEMA). Bangladesh
under the Rapid Financing Instrument (RFI) to the
was well-positioned to become a new hub for PPE
country on May 29 in a response to the 60th request for
manufacturing. This would help keep people safe and
emergency financial assistance to help its member
secure worldwide while helping Bangladesh`s economy
countries. The allocation will help finance the health,
and ensuring that the large workforce of 4.1 million in
social protection and macroeconomic stabilization
the garment sector can still make a good livelihood.
measures, meet the urgent balance-of-payments and
With a goal of becoming a major global player in this
fiscal needs arising from the Covid-19 outbreak. It will
sector in the next three years, the company has set up
also catalyze additional support from the international
a new PPE Industrial Park, just a 10-minute walk from
community.
Beximco Industrial Park.

09 MTBiz
BUSINESS & ECONOMY

NATIONAL NEWS
Credit card users hassled during Covid-19
Credit card users thought they would
benefit greatly from Bangladesh Bank's
order not to charge compound interest on
bills payable till the end of this month, but
that was not the case. After the circular
Total credit cards as of January: 15.56 lakh was issued on April 15, many users
stopped paying their credit card bills as
Transactions in January: Tk.1357 crore they thought their interest would be
Top 5 banks in credit card business waived. However, they woke up to calls
City Bank, Standard Chartered, EBL, from their banks for payments to avoid a
Brac Bank and Mutual Trust Bank hefty interest burden of 24 percent to 30
percent per year – regardless of the
Interest rates
impact of the Covid-19 pandemic on
24%-30% per annum
them. According to bankers, the central
bank took the decision without consulting
the banks. Moreover, the banking
regulation and policy department of the central bank issued the circular – instead of the payments systems
department, which knows how banks operate credit card business. The central bank had earlier asked banks not to
charge late payment fees on credit cards until May 31. According to the central bank data, as of January, 59 banks
have issued 15.56 lakh credit cards and the transactions in January stand at BDT 1,357 crore.

Next fiscal's export: EPB estimates below current target

Against the target for FY20, in 11 months
(July-May) Bangladesh earned USD 30.96
billion, down by 18% from a year earlier. The
Export Promotion Bureau (EPB) has
proposed the commerce ministry to set the
merchandise export target at USD 37.44
billion for the next fiscal year 2020-2021. It,
however, has estimated USD 32.99 billion
export earnings for the FY20 against a
government set export target of USD 44.5
billion from goods. Against the target for
FY20, in 11 months (July-May) Bangladesh
earned USD 30.96 billion, down by 18% from
a year earlier. The EPB’s target for FY
2020-2021 is 13.45% higher than estimated
earnings for the current fiscal year. For the
garment sector, the bureau estimated USD 27.27 billion. During the July-May period of the current FY20, the sector
earned USD 25.90 billion. “The EPB has proposed less than current year’s export target as the export earnings is going
through sharp decline due to covid pandemic,” seeking anonymity a high official of the EPP said. According to the
World Trade Organization (WTO) data, world trade is expected to fall by between 13% and 32% in 2020 as the COVID-
19 pandemic disrupts normal economic activities and lives around the world.

10 MTBiz
 BUSINESS & ECONOMY

NATIONAL NEWS
Beximco, Indian Oil team up to grab a slice of Omera gets USD 20m from IFC to meet funding needs
fast-growing LPG pie
Beximco LPG, a subsidiary
of Beximco Group, has
teamed up with the
Indian state-owned Indian
Oil Corporation (IOC) to
profit off Bangladesh's
fast-growing Liquefied The International Finance Corporation (IFC) will lend
Petroleum Gas (LPG) UDS 20 million to Omera Petroleum in order to help the
market and supply the Bangladeshi company meet funding requirements to
cooking gas to northeast face the challenges posed by the coronavirus
India. The new venture is a 50-50 partnership between pandemic. The funding will help Omera, a subsidiary of
Dubai-based IOC Middle East FZE, a wholly-owned Mobil Jamuna Bangladesh, enhance storage and filling
subsidiary of the India’s largest refiner and marketer of capacity and overcome challenges resulting from the
petroleum products, IOC and the Beximco Group. The ongoing limited access to foreign currency. The loan's
LPG market in Bangladesh has seen a five-fold growth in tenure is four years and it will be paid back on a
the past five years and is expected to grow at a quarterly basis by Omera, which has been engaged in
compound annual growth rate of 12-13 per cent, import, storage, bottling and distribution of liquefied
according to Sanjiv Singh, Chairman of Indian Oil. As per petroleum gas (LPG) since 2015. It is the second loan
the business plan, the JV will begin functioning by from the IFC, the private sector lending arm of the
acquiring Beximco's existing LPG assets. It aims to set World Bank, disbursed through its Covid-19 fast-track
up a large LPG terminal at a deep-water port in financing support package. In 2018, the IFC invested
Bangladesh, which would facilitate receipt of LPG in UDS 20 million as a long-term loan for 5 years in Omera
very large gas carriers, leading to a reduction in the cost Petroleum to help the company double its capacity and
of imports, Singh said. The agreement is a major increase the availability of LPG, especially in rural areas.
milestone in the annals of India-Bangladesh The Omera has a plan to raise BDT 238.43 crore from
cooperation, he said, while presiding over the signing the stock market as well to expand its LPG business.
ceremony recently.

RMG export earning plummets by 18.45pc in FY 2019-20

The country's earnings from garment export in the outgoing
2019-20 fiscal year declined to USD 27.83 billion – an 18.45
percent decline compared to the previous fiscal year. The
sharp dip in the export earnings from RMG sector has been
largely attributed to the ongoing COVID-19 pandemic. The
export earning target was 38.20 billion USD for the
immediate past fiscal year. Bangladesh exported USD 34.13
billion worth of RMG products in the 2018-19 fiscal. RMG
exports, which typically contributes to 84 percent of the
national export, was lower in the last fiscal year as many
factories were shut down in April due to the pandemic. In
June, the country earned USD 2.12 billion from garment
exports, according to data from Bangladesh Garment
Manufacturers and Exporters Association (BGMEA). In May the earnings from apparel export was 1.23 billion USD and
in April the amount was 0.37 billion USD, the data added.

11 MTBiz
 MTB NEWS & EVENTS

MTB DONATES BDT 50 MILLION TO

THE PRIME MINISTER RELIEF & WELFARE FUND

Mutual Trust Bank Ltd. (MTB) has donated BDT 50 million to the
Prime Minister's Relief and Welfare Fund to help fight the outbreak Corporate Social Responsibility
of coronavirus.
The bank handed over the cheque through Bangladesh Association
of Banks (BAB).

MTBIANS DONATE ONE-DAY SALARY

Employees of MTB have donated their one-day salary for the people in need, who have been suffering during the
nationwide shutdown due to the coronavirus pandemic and to help fight the coronavirus outbreak in the country.
‘The country and its people have given us many successes and now, this is our duty to stand beside our country and
its people during their time in distress’, Syed Mahbubur Rahman, MTB Managing Director & CEO, said. He also
expressed heartfelt gratitude to all MTBians for their support towards the noble cause for the nation.

MTB PRESENTS DISINFECTANT CHAMBER TO KUWAIT-MOITREE

GOVERNMENT HOSPITAL AND KURMITOLA GENERAL HOSPITAL

MTB, as part of its Corporate Social Responsibility (CSR) initiatives, has recently
presented two units of disinfectant chamber to Kuwait-Moitree Government
Hospital and Kurmitola General Hospital for their doctors and healthcare staff
with a view to curbing the outbreak of the COVId-19 pandemic in the capital.
The initiative was implemented with the support of JAJABOR BUET 97 has
developed this customized chamber for instant support to combat against
Covid 19.

MTB FOUNDATION SUPPORTS LEKHAPARA TRUST

MTB Foundation, in its effort to align its CSR initiatives with

the Sustainable Development Goals (SDGs), recently
extended support to LEKHAPARA Trust for the
underprivileged and physically challenged children of
‘Koltapara Anondo Pathshala’ school at Sonargaon,
Narayanganj. Syed Mahbubur Rahman, Managing Director &
CEO, MTB, handed over the cheque to Dr. Shahida Akhter,
Chairperson, LEKHAPARA Trust, at a simple ceremony held at
the bank's Corporate Head Office, MTB Centre, 26 Gulshan
Avenue, Dhaka 1212. Shabbir Ahmed Osmany, Trustee of
LEKHAPARA Trust and Azam Khan, Group Chief
Communications Officer and Samia Chowdhury, Deputy Head, Group Communications of MTB along with other
officials of the bank were also present at the occasion.

12 MTBiz
MTB NEWS & EVENTS

MTB INTRODUCES MTB EXTREME, SAVINGS ACCOUNT SERVICE

WITH FREE COVID-19 INSURANCE COVERAGE
MTB in partnership with Guardian Life Insurance Limited has recently launched MTB
Extreme, the country’s first ever savings account service with free COVID – 19
insurance coverage. Syed Mahbubur Rahman, Managing Director & CEO, MTB
announced the launch of the new MTB service through a virtual launching ceremony
while M M Monirul Alam, Managing Director & CEO, Guardian Life Insurance Limited
joined the event.
New MTB savings account holders will be able to claim dual benefit - interest on the
savings amount and the covid-19 life insurance coverage.
Syed Rafiqul Haq, Additional Managing Director & Chief Businesses Officer, Towfiqul
Alam Chowdhury, Head of Business, Retail Banking Division and Azam Khan, Group
Chief Communications Officer, MTB were also virtually present at the launching ceremony.

MTB INTRODUCES MTB SHIELD, FIXED DEPOSIT

WITH COVID – 19 INSURANCE COVERAGE

MTB in partnership with Guardian Life Insurance Limited has recently launched MTB
Shield, the country’s first ever fixed deposit with COVID – 19 along with life insurance
coverage. Syed Mahbubur Rahman, Managing Director & CEO, MTB announces the
launch of the new MTB deposit product through a virtual launching ceremony while
M M Monirul Alam, Managing Director & CEO, Guardian Life Insurance Limited joined
the ceremony.
New MTB fixed deposit holders, with a minimum investment of BDT 100,000, will be
able to claim dual benefit – interest on the fixed deposit amount and the covid-19 life
insurance coverage.
Syed Rafiqul Haq, Additional Managing Director and Chief Business Officer, Md.
Towfiqul Alam Chowdhury, Head of Business, Retail Banking Division and Azam Khan, Group Chief Communications
Officer, MTB along with other senior officials were also present virtually at the launching ceremony.

MTB INTRODUCES GREEN PIN SERVICE FOR MTB CARDHOLDERS

MTB with a view to enhancing Green Banking and Sustainable Development,

launches Green PIN for all MTB Cardholders. Green PIN is a Contact Centre IVR based,
instant and secure PIN generation service for all types of cards issued by MTB. This
paperless service will facilitate MTB Cardholders to set their new card PIN, change the
old PIN as well as reset the old PIN instantly just by calling MTB 24/7 Contact Centre
at 16219 from their registered phone numbers. They no longer need to visit MTB
Branches or wait for long to receive the new PIN or change the existing PIN.

13 MTBiz
 MTB NEWS & EVENTS

MTB FOUNDATION DISTRIBUTES STAPLE FOOD ITEMS

AMONGST THE AFFECTED PEOPLE DURING COVID-19 PANDEMIC

MTB Foundation (MTBF), as part of its Corporate Social Responsibility (CSR) initiatives and to help fight the
coronavirus outbreak in the country, has distributed essential groceries such as rice, lentils, oil, potato, salt, sugar,
flattened rice, flour and soap amongst 900 families who have been suffering during the nationwide shutdown due to
the coronavirus pandemic in Syedpur, Thakurgaon and Panchagar. Its Humanity Foundation (IHF) has organized the
distribution programme.

MTB FOUNDATION DISTRIBUTES CASH AMONGST THE AFFECTED

PEOPLE DURING COVID-19 PANDEMIC

MTB Foundation (MTBF), as part of its Corporate Social

Responsibility (CSR) initiatives, made cash donation
amongst 500 affected families during Covid-19
pandemic to meet their essential expenses in Char
Patila, Char Fasson, Bhola. Each family received BDT
2,000. Management and Resources Development
Initiative (MRDI) has distributed the cash via Mobile
Financial Services (MFS) through Unnayan Dhara Trust
(UDT).

MTB FOUNDATION DISTRIBUTES ESSENTIAL GROCERIES AMONGST

THE AFFECTED PEOPLE DURING COVID-19 PANDEMIC

MTB Foundation (MTBF), as part of its Corporate Social

Responsibility (CSR) initiatives, distributed essential
groceries such as rice, lentils, oil, potato, salt, sugar,
flattened rice, flour and soap amongst vulnerable
families who had been suffering during the nationwide
shutdown due to the coronavirus pandemic in
Madaripur, Habiganj, Gaibandha, Rajshahi,
Chattogram, Cox’s Bazar, Teknaf and Rayerbazar,
Dhaka. JAAGO Foundation organized the distribution
programme.

14 MTBiz
MTB NEWS & EVENTS

MTB SIGNS MOU WITH AG MOTORS

MTB has signed a MoU with AG

Motors at a simple ceremony held at
the bank's Corporate Head Office,
MTB Centre, 26 Gulshan Avenue,
Dhaka 1212. Under this agreement,
the clients of AG Motors will be able
to avail Auto Loan with a low
processing fee and discounted
interest rate from MTB. MTB clients,
likewise, will be entitled to buy
vehicle with a special discounted
offer from AG Motors.
Yousuf Aman, Director (Operations),
AG Motors and Syed Rafiqul Haq,
Additional Managing Director & Chief
Business Officer, MTB signed the MoU
on behalf of their respective organizations. Shihab Ul Alam, Assistant Manager, Sales and Md. Majharul Islam,
Executive, Brand from AG Motors and Md. Towfiqul Alam Chowdhury, Head of Business, Retail Banking Division,
Mohammad Anwar Hossain, Head of Cards and Azam Khan, Group Chief Communications Officer from MTB along
with other senior officials from both the organizations were also present at the signing ceremony.

MTB ORGANIZES SCHOOL BANKING CONFERENCE 2020

AT COX’S BAZAR

MTB has organized “School Banking

Conference 2020” at Cox’s Bazar as the
Lead Bank. S. M. Moniruzzaman, Deputy
Governor, Bangladesh Bank attended the
program as the Chief Guest.
Syed Rafiqul Haq, Additional Managing
Director & Chief Business Officer, Md.
Towfiqul Alam Chowdhury, Head of
Business, Retail Banking Division, Azam
Khan, Group Chief Communications
Officer, Nafeesa Chowdhury, Vice
President, Retail Banking Division and
Mohammad Bashirussamad, Manager,
Cox's Bazar Branch, MTB along with senior
officials from MTB, as well as all scheduled banks operating in Cox’s Bazar, dignitaries and leaders of local business
associations, representatives from different strata also attended the event.
The main objective of the conference was to build awareness among the students about the importance of savings
and its contribution in the economy.

15 MTBiz
INDUSTRY APPOINTMENTS

NATIONAL NEWS
Ahsanul elected Union Bank Chairman Professor Shibli Rubayat new BSEC Chairman
Ahsanul Alam has been Professor Shibli Rubayat Ul
elected Chairman of Union Islam, Dean of the Faculty of
Bank at the 66th board Business Studies at Dhaka
meeting of the bank. His University (DU), has been
family owns the S Alam appointed Chairman of the
Group of Industries and he Bangladesh Securities and
has been serving as Chief Exchange Commission (BSEC)
Executive of S Alam and for the next four years. Shibli
Company since 2004. He is Rubayat Ul Islam, also
the Proprietor of Genesis Enterprise and Chairman of Chairman of the Department of Banking & Insurance,
Hasan Abasan (Pvt) Limited. He is also the Managing DU, is additionally serving the state-run general insurer
Director of Genesis Textiles Accessories and Apparels Sadharan Bima Corporation as its Board Chairman.
Limited and Western Designers Limited.
Tariqul appointed MD & CEO of SBAC Bank
Kamal becomes Meghna Bank Vice-Chairman
Tariqul Islam Chowdhury has
Md Kamal Uddin has been been appointed as Managing
elected Vice-Chairman of Director and Chief Executive
Meghna Bank Limited at its Officer of South Bangla
99th board meeting held Agriculture and Commerce
recently. Kamal is an Bank (SBAC) Limited. Prior to
entrepreneur in the the appointment, he served
readymade garment sector as the acting Additional
and a director of the
Managing Director of the
Bangladesh Garment
bank. He joined the bank in 2018 as Deputy Managing
Manufacturers and Exporters Association (BGMEA). He is
Director (DMD). Before joining SBAC Bank, Tariqul was
also the Managing Director of Diganta Packaging and
the DMD of state-owned Sonali Bank Limited. With
Accessories Ltd.
over three decades of banking experience in diversified
Bank Alfalah gets new Country Head fields, he started his career with Sonali Bank as a
Adil Islam has been financial analyst in 1984.
appointed as Country Head Pubali Bank gets new AMD
of Bank Alfalah. Prior to this
appointment, he held the Mohammad Ali has recently
position of Managing been promoted as Additional
Director & CEO of Meghna Managing Director and Chief
Bank Limited. He has more Operating Officer of Pubali
than 29 years of banking and Bank. Prior to the promotion,
business leadership he held the position of
experience, gained through working in various Deputy Managing Director of
international banks and financial institutions in South & the bank. Ali joined the bank
Southeast Asia and the Middle East. He has held as general manager and chief technical officer in 2008.
business and functional head positions both in He completed his graduation and post-graduation in
Bangladesh and in overseas locations, working for Computer Science and Engineering from the
renowned banks like HSBC, ANZ, American Express, Bangladesh University of Engineering and Technology,
Mashreq Bank, Bank Saudi Al Fransi (Credit Agricole) and obtained a master's degree in Development
and other international organizations. Studies from Dhaka University.

16 MTBiz
ECONOMIC FORECAST

INTERNATIONAL NEWS
Global Economic Prospects 2020: World Bank
Lasting Scars of the COVID-19 Pandemic Global financial conditionsglobal recession. Along with
the public health crisis, EMDEs are facing tighter
The COVID-19 pandemic has struck a devastating blow
financing conditions, plunging oil and other commodity
to an already-fragile global economy. Lockdowns and
prices, sharp declines in remittances, and collapsing
other restrictions needed to address the public health
international trade.
crisis, together with spontaneous reductions in
economic activity by many consumers and producers, • Magnifying short-term weakness. Many EMDEs
constitute an unprecedented combination of adverse entered this global recession less well-prepared, and
shocks that is causing deep recessions in many with larger vulnerabilities, than when they were hit by
advanced economies and emerging market and the last global recession in 2009. EMDEs that are most
developing economies (EMDEs). Those EMDEs that vulnerable to the impact of the pandemic include those
have weak health systems; those that rely heavily on that have weak health systems that rely heavily on
global trade, tourism, or remittances from abroad; and global trade or tourism, that are vulnerable to financial
those that depend on commodity exports will be disruptions, and that depend on oil and other
particularly hard-hit. Beyond its short-term impact, commodity exports. The recession will prolong a
deep recessions triggered by the pandemic are likely to decade of disappointing growth for EMDEs.
leave lasting scars through multiple channels, including • Persistent damage in the long run. COVID-19 and the
lower investment; erosion of the human capital of the resulting recessions engulfing vast swaths of the
unemployed; and a retreat from global trade and supply developing world will leave lasting scars, eroding
linkages. These effects may well lower potential growth productivity and potential output for extended periods.
and labor productivity in the longer term. The long-term damage will be particularly severe in
On March 11, the World Health Organization declared economies that suffer financial crises, and in energy
COVID-19 a pandemic—the first such declaration since exporters because of plunging oil prices. In the average
the swine flu in 2009. As infections and deaths soared, EMDE, over a five-year horizon, a recession combined
governments around the world have taken with a financial crisis could lower potential output by
unprecedented measures— including lockdowns and almost 8 percent while, in the average EMDE energy
quarantines, school and business closures, and travel exporter, a recession combined with an oil price plunge
restrictions—to stem the spread of the pandemic. could lower potential output by 11 percent. The
These measures, together with the spontaneous pandemic is expected to exacerbate the weakness in
reactions of consumers, workers and businesses, have productivity growth and private investment that were
caused severe disruptions to activity in many sectors features of the past decade.
and a sharp global economic downturn. This has been • Aggravating long-term challenges. Recessions
accompanied by record capital outflows from emerging associated with the pandemic will likely have an even
market and developing economies (EMDEs), a collapse larger impact on long-term growth prospects because
in global trade, and a plunge in oil demand. of pre-existing vulnerabilities, fading demographic
dividends and structural bottlenecks, and permanent
Main findings
changes in behavioural patterns, including
• Evolution of the pandemic: While outbreaks in most consumption habits, and human capital formation. In
advanced economies appear to be abating, the most years during the past decade, EMDE growth fell
pandemic is rapidly spreading across EMDEs, including short of its long term average. This was reflected in
low-income countries (LICs), where health care systems repeated downgrades to long-term growth projections
have very limited capacity. Severe short-term impact. for EMDEs. The pandemic is expected to exacerbate the
The pandemic, the widespread restrictions put in place multi-decade trend slowdown in potential output
to stem it, and the spontaneous reactions of many growth and productivity growth.
consumers and producers have already caused a deep

19 MTBiz
 ECONOMIC FORECAST
• Policies. While the immediate priorities of threatening agricultural production. Delays in input
policymakers are to address the health crisis and deliveries and limited access to financing, which have
moderate the short-term economic losses, the likely been exacerbated by the increased reliance on global
long-term consequences of the pandemic highlight the value chains, have been causing operational challenges
need to forcefully undertake comprehensive reform for firms. Over the longer term, workplace closures and
programs to improve the fundamental drivers of quarantines can limit the diffusion of new technologies
economic growth. and knowledge, with lasting damage to productivity.
The economics of the pandemic: Shocks and spillovers Global spillovers to EMDEs: These adverse demand and
supply shocks have resulted in cross border spillovers to
COVID-19 is the most adverse peacetime shock to the
EMDEs through multiple channels—real channels,
global economy in a century. Demand for goods and
including disruptions in global trade, supply chains,
services has been severely curtailed, while at the same
travel, and tourism; and financial channels, including
time supply has fallen sharply, as the number of people
sharp declines in remittance flows and large capital
working has declined and the cost of doing business has
outflows amid a flight to safety in March. Commodity
risen. The shock has caused unprecedented disruptions
prices have been depressed by the sharp decline in
to global trade, travel, and tourism; stress in global
demand and, with oil the most affected. These
financial markets; and sharp declines in commodity
cross-border spillovers have been amplified by plunging
prices.
confidence and rising uncertainty.
Demand shortfalls: While the measures taken by
Initial impact: Economic activity, financial and
governments, consumers, and firms to reduce social
commodity markets Consistent with the gravity of the
interaction have been critical to slow the spread of the
shocks and spillovers discussed above, recent data
virus, they have entailed significant disruptions to
point to substantial disruptions in global activity and
economic activity. A substantial share of private
trade, a sharp tightening of financial conditions, and a
consumption requiring social interaction was lost in the
severe decline in commodity prices.
first half of the year.
Global activity and trade:
Reduced consumption of goods and services has been
one of the main drivers of lost output in a range of Data released in the first half of 2020 point to a severe
model-based estimates of the effects of pandemics. global recession. The global composite PMI—a gauge of
Investment has also been curtailed, not only by worldwide manufacturing and services activity—sank
difficulties in maintaining production and construction deep into contractionary territory to a record low of
but also by sharply weaker growth prospects, rising 26.5 in April (Figure 01). Along with the implied sharp
financing costs, eroding confidence, and increased drop in output, global trade has also contracted
uncertainty. significantly. The new export orders PMI stood at 35.3 in
April, deep in recessionary terrain. Its 11-point fall from
Supply disruptions: Air travel, schools and universities,
March was the steepest on record and considerably
restaurants, theaters, sports venues, and other facilities
steeper than at the onset of the global financial crisis,
servicing masses of people have been largely closed
during the Euro Area crisis (2010- 13), or during the
down. Labor supply has declined, because of
recent period of trade tensions (2018-19).
restrictions on movement and human interaction,
illness of workers and family members, and school With international travel restricted and internal travel
closures (Keogh-Brown et al. 2010; Kilbourne 2004). discouraged in most countries, global tourism and
Workers able to work at home have in many countries travel have been severely curtailed. So far this year,
been encouraged or instructed to do so, but fewer jobs tourist arrivals declined by nearly 100 percent among
can be undertaken remotely in EMDEs than in advanced reporting countries. Globally, the number of
economies, partly because of more limited internet commercial flights is down about 70 percent since the
connectivity (ILO 2020). In some advanced economies, beginning of the year.
such restrictions as quarantine requirements on the Disruptions to production and international transport
entry of temporary foreign workers have been have increased the risk that critical inputs will be

20 MTBiz
ECONOMIC FORECAST
unavailable, potentially leading to cascading production have been particularly affected. In the automobile
shortfalls in global value chains. Manufacturers’ stocks sector, a collapse in demand, combined with
of purchases have fallen, while suppliers’ delivery times production and delivery challenges, has led to a
have lengthened. Industries reliant on “just-in-time” precipitous plunge in sales worldwide.
inputs from global value chains and lean inventories

FIGURE 01 Indicators of economic activity and international trade

A. Composite PMIs B. Global Sentix Index

Index 50+=expansion Percent
70 United States Euro Area 70
China World (current)
World (GFC) 50
50 30
10
-10
30
-30
-50
10 -70
-7 -6 -5 -4 -3 -2 -1 t=0 1 2 3 2006

2008

2010

2012

2014

2016

2018

2020
Months

C. Steepest one-month declines in D. Steepest one-month declines in

container shipping since 2007 new export orders since 2007
Percent Change in index
0 0
-2 -1
-4 -2
-3
-6
-4
-8 -5
-10 -6
-12 -7
Mar-18

Jun-13

Sep-11
Feb-20
Sep-10

Oct-08
Feb-20

Feb-19
Oct-12
Jan-09

Jun-12

Jul-15

E. Three steepest contractions in F. Number of global commercial

global tourism revenues since 2006 flights
Percent Index, 100= January 20, 2020
0 120
100
-20 80
60
-40 40
-60 20
0
2-Mar
17-Feb

16-Mar

30-Mar

11-May
3-Feb
20-Jan

13-Apr

27-Apr

-80
Mar-20 Feb-09 Apr-08

Source: flightradar.com; Haver Analytics; Institue of Shipping Economics and Logistics; J.P.Morgan;
Sentix GMBH; World Bank.

21 MTBiz
 ECONOMIC FORECAST
Global financial conditions largest on record (Figure 02). More recently, global risk
sentiment improved in May amid large-scale liquidity
Global equity markets fell sharply as the pandemic
injections by major central banks and a gradual
spread across the world. Within a week of reaching an
relaxation of lockdown measures in some countries.
all-time high in mid-February, the S&P 500 index in the
Capital outflows from EMDEs have subsided and equity
United States experienced its fastest decline since
market valuations have retraced a share of their earlier
October 1987, and stock markets in other major
losses. Nonetheless, financial conditions remain fragile
economies experienced declines of similar magnitude.
for many EMDEs. Remittance inflows to EMDEs are
The VIX volatility index more than quadrupled in March
expected to collapse in 2020 across EMDE regions
before settling at about double its February value in
(World Bank 2020). Foreign aid flows may also shrink in
mid- May.
2020 as donors focus on supporting their own
Net portfolio outflows from EMDEs were the largest on economies (UNCTAD 2020).
record in March. Across all EMDE regions, remittances
Immediate policy measures should support health care
in 2020 are expected to suffer larger declines than
systems and moderate the short-term impact of the
during the global financial crisis or the Asian financial
pandemic on activity and employment. In addition, a
crisis. Most commodity prices have fallen since
comprehensive reform drive is needed to reduce the
January, with oil prices in March experiencing their
adverse impact of the pandemic on long-term growth
largest one-month fall since at least 1960. Flight to
prospects by improving governance and business
safety resulted in a sharp tightening of EMDE financing
environments, and expanding investment in education
conditions. Net portfolio outflows from EMDEs during
and public health.
each of the last three weeks of March were the three

FIGURE 02 Financial and commodity market conditions

A. Sharpest decline in weekly net B. Annual change in remittances

portfolio inflows into EMDEs since
2005
US$, billions Percent
1998 2009 2020
0
-5
-10
-15 0
-20
-25
-30 -15
-35
Aug-01

Aug-07
Mar-20

Jun-13

Feb-18

Jul-15

-30
EAP ECA LAC MNA SAR SSA

C. Steepest one-month declines in oil D. Change in metal prices sincelate

prices since 1960 January
Percent Percent
0 20 Trough Latest
10
0
-10 -10
-20
-20 -30
-40
-50
Aluminum

-30
Platinum
Nickel
Copper

Silver
Zinc

Tin

Lead

Gold

-40
Mar-20

Dec-00
Feb-16

Jan-15
Oct-08

Industrial Precious

Source: Bloomberg; Dealogic; Institute of International Finance; World Bank.

22 MTBiz
 NEW PRODUCTS
"Immutouch" Vibrating Bracelet Apple Wearables
In the age of coronavirus, we Apple wearables have
all have to resist the urge to been designed to
touch our faces. It’s how the ‘inspire a healthier
virus can travel from life all-round’ helping
doorknobs or other objects to keep track of your
to your mucus membranes and get you sick. Luckily, a breathing, sleep
startup called Slightly Robot had already developed a patterns, heart rate, and noise levels. The Apple Watch
wristband to stop another type of harmful touching — Series 5 has been referred to as the ‘ECG on your wrist,
trichotillomania, a disorder that compels people to pull Anytime, Anywhere’ allowing you to integrate it with
out their hair. "People touch their face 23 times per the ECG app making it capable of generating an ECG
hour. It's an unconscious behavior that just happens,"
similar to a single-lead electrocardiogram. Using finger
Seattle-based inventor Justin Ith said. The bracelet can
recognition, the electrodes built into the Digital Crown
be calibrated to sense when someone is reaching for
work together with the ECG app to read your heart’s
their nose, mouth or eyes to then vibrate when it feels
electrical signals in just 30 seconds. It can even indicate
the wearer reaching for their face. The vibration is
whether your heart rhythm shows signs of atrial
meant to alert the person to their unconscious action,
fibrillation – a serious form of irregular heart rhythm.
and reduce the risk of the coronavirus.
The Apple wearables series also provide an app called
Hygienehook The Breathe app to help practice mindfulness and
Touching a door handle is relaxation techniques in the home. It does this through
such an ubiquitous part of a series of calming breaths to help reduce stress levels
life that most could not and improve overall health. This makes the Apple
count how many times they Watch Series the perfect tracking device and app for
have done it throughout the someone looking to monitor their general health and
day. However, with most surfaces now regarded as wellbeing during the lockdown.
potential health hazards, door handles pose an
Awair Wireless Air Monitor
unavoidable problem. British furniture designer Steve
Brooks sought to fix the dilemma, with a simple device COVID-19 has recently
that looks like the top of a coat hanger that extends to got many of us
a base designed to be gripped. The hook is then used to thinking about the
push, pull or turn a door handle. Brooks said his idea quality of the air that
was to make the lives of health care workers easier. we breathe,
JBL Reflect Flow especially seeing as
the disease is known to
Though smart technology is
be transmitted via air particles. The Awair Wireless Air
not a new concept, it is
Monitor can be directly connected to any iOS or
being repurposed to detect
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possible virus symptoms in
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public spaces. Police forces
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deployed a thermal imaging smart helmet, designed to Nondispersive infrared (NDIR) sensor technology for
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U.S. are using similar thermal imaging technology in majority of the population is now remote working, or
stores, to detect if customers walking in are potentially spending large amounts of time indoors, it is more
running a fever. N901 Thermal imaging helmet has important than ever to ensure that our surroundings
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epidemic prevention in hospitals, Office buildings, have experience of using and have seen huge benefits
transport hubs, factories, pedestrian zone in trading on monitoring the air quality for staff and employees.
area, scenic spots and parks, and with traffic police.

23 MTBiz
FINANCIAL GLOSSARY
S

O
G
S

A
R
G O O S S

Y
L A A R R Y Y

Earnings at risk (EAR): The quantity by which net Earnings retention rate: The percent of current
income is projected to decline in the event of an period earnings retained by the firm as opposed to
adverse change in prevailing interest rates. One being paid out as dividends or partners’ withdrawals.
measure of an institution’s exposure to adverse The after-tax net income minus dividends then
consequences from changes in prevailing interest divided by the after-tax net income. Not to be
rates. See value at risk (VAR) for an alternative confused with retained earnings, a name for the
measure.
quantity on the balance sheet that includes the
Gains trading: The practice of purchasing securities accumulated total of earnings retained.
and then selling those that subsequently appreciate
Earnings credit rate: An interest rate applied to
in value while retaining as investment portfolio assets
those that cannot be sold at a profit. Accounting and investable account balances to determine how much
banking regulators have repeatedly and strongly expense for bank services used by a depositor is offset
criticized this practice. Rules related to the transfer of by the deposits maintained by that depositor. The
securities from trading portfolios to available-for-sale same calculation can work in the opposite way by
(AFS) or held-to-maturity (HTM) portfolios are applying the earnings credit rate to the actual service
specifically designed to prohibit gains trading. charges to determine how much deposit balance is
Rate: The cost of debt service paid by a borrower or needed to pay for the charges. The earnings credit
issuer to a lender or investor. The rate is expressed as rate is always expressed as an annual rate even
an annual percentage of the amount borrowed. For though the calculations are usually done monthly.
some notes and bonds that pay interest semiannually, S corporation: Legal entity that is a special kind of
the semiannual interest due to the investor used to Corporation. An S corporation offers shareholders the
be evidenced by a coupon that could be detached and same limitations on personal liability that are
sent for collection. Thus the cost to the issuer for available to corporate stockholders. At the same time,
notes and bonds paying semiannual interest is often S corporations are taxed similarly to partnerships,
called the coupon rate. Lenders or investors may that is, the income or loss incurred by the S
receive a yield that is higher or lower than the rate. corporation is allocated to the stockholders for tax
purposes.

24 MTBiz
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