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Effects on RMG sector due to COVID-19 in Bangladesh






Article by Sadia Samme | North South University

The possible negative impact of Covid-19 on Bangladesh’s economy is dependent on how long the crisis lasts. Following global lockdowns, there is a small chance that viruses will resurface in successive waves, even if in small numbers, posing a continuing economic threat. Experts, on the other hand, believe that a potential global recession would fade away. The International Monetary Fund predicts a worsening of the recession. Bangladesh’s economic fate is inextricably linked to the fate of nations that permit the two R’s that drive it: ready-made garments and remittance.

Companies that acquire ready-made garments (RMG) from Bangladesh are closing their doors in cities across Europe and the United States. H&M, GAP, Zara, Marks & Spencer, and Primark, all big buyers, have shuttered their stores. People are avoiding discretionary expenditure, which has brought shopping to a halt. There’s also some concern about raw materials coming from China. As of March 23, 264 Bangladeshi garment factories have been shut down. H&M, one of Bangladesh’s major clothing purchasers, has forced to temporarily halt new purchases while evaluating potential adjustments to existing orders.

At the time of writing, BGMEA President Ms. Rubana Huq estimated that the overall impact of order postponement/cancellations would be US$1.5 billion, or approximately half of our typical monthly export income. According to insiders questioned, if the virus continues to affect global supply chains, buyer demand, and, of course, worker health and safety, export revenue losses may exceed US$ 4.0 billion.

This is unsurprising, given that the downturn in the US and EU economies has had a knock-on effect on Bangladesh’s economy. The global financial crisis of 2008 exemplifies this relationship. However, international credit rating agencies predict that Bangladesh’s RMG sector would grow.

Meanwhile, the second pillar of Bangladesh’s economy, migrant workers’ remittances, would inevitably suffer a setback. Around ten million Bangladeshis work in other countries, the bulk of them are in the Middle East, the United States, the United Kingdom, and Malaysia. Workers are losing salaries as a result of travel restrictions, an economic slowdown, and curfews in host nations such as Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Malaysia, the United States, and the European Union.

In addition, oil prices have plummeted, which is likely to increase demand for migrant labor. Oil prices are frequently a good predictor of inbound remittances. Falling oil prices have a delayed impact on remittances to Bangladesh, according to history. Prices are now decreasing due to lower demand from industries like as aviation and transportation, as well as the price war between Russia and Saudi Arabia.

Overall, the reduction in export income, the layoffs of RMG workers, and the reduced flow of remittances will have an impact on demand in Bangladesh’s urban and rural consumer economies.

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