Firms used own savings to cope post lockdown economic recovery: SANEM finds

Firms used own savings to cope post lockdown economic recovery: SANEM finds

Dhaka November 10 2021:

Emerging challenges that affecting economic recovery of Bangladesh are fuel price hike, inflationary pressure, falling remittances, the new COVID-19 wave and need for a wider coverage of vaccination.

Faster recovery was observed in Restaurant, RMG, Textile, and Light Engineering sectors amongst others while a year-on-year comparison is made.

Sectors like Transport, Light Engineering, Tourism, Textile, RMG, and ICT amongst others have expressed greater confidence in the upcoming quarter, reflecting their optimism for the better business prospects in near future.

The overall business confidence in October-December 2021 had improved compared to the July-September 2021 quarter. The improvement is visible for all sub-components of Business Confidence Index.

Such findings came from a webinar titled “COVID-19 and Business Confidence in Bangladesh: Findings from the 6th round of the nationwide firm-level survey” was organized by South Asian Network on Economic Modeling (SANEM), held on Wednesday in the city.

Dr. Selim Raihan, Executive Director of SANEM presented research findings during the webinar.

According to SANEM findings, most of the time over the last one and half years, the business status and confidence were worse for micro, small and medium firms compared to large firms, non-exporter firms as opposed to exporter firms, firms from services sector than manufacturing firms, and firms located outside Dhaka.

21 per cent of respondents in the sixth round of the survey (Jul-Sep 2021) observed that Bangladesh was on a path of strong recovery, while it was only 9 per cent in the earlier round. Similarly, their views on moderate recovery increased to 52 per cent in this round from 27 per cent in the previous round.

Due to the second wave of the COVID-19, firm’s internal recovery rate went down to 34.9 per cent in July 2021 (compared to March 2020) from 57.4 per cent observed in April 2021 (compared to March 2020).

However, the recovery rate increased to 56.8 per cent in September 2021 (compared to March 2020) as the economy reopens at a full-phase in the middle of July-September 2021 quarter.

The overall EBI stagnated over the last two quarters. However, the EBIs of transport and government support improved during this period.

46.2 per cent firms availed of any loan in the last 12 months. Amongst them, 77.5 per cent availed from formal sector (like banks) and 22.5 per cent availed from informal sectors (like friends and relatives, co-operate society etc.).

Completed paperwork, collateral problem, lengthy procedure, bank-client relationship etc. are the major problems for the firms to avail of any loan from the banks.

During July-September 2021, the major coping strategies of the firms involved using own savings (71 per cent). The other major strategies were borrowing (41 per cent), stimulus package (18 per cent), and employee lay-off (14 per cent).

The coverage of vaccination for both employer and employee increased in July-September 2021 quarter compared to April-June 2021 quarter. The survey shows that per cent of respondent (employers) got at least one dose of vaccine while the rate was per cent in the earlier round.

In the case of employees vaccination, this figure was 55.07 per cent in July-September 2021 quarter compared to 25.53 per cent in the previous quarter.

SANEM conducted quarterly firm-level surveys since July 2020 to understand the state of the industrial and service sectors in Bangladesh during the COVID-19 pandemic.

Various sub-sectors of manufacturing and service sector, such as Garments, Textiles, Leather and Leather Products, Pharmaceutical, Food Processing, Plastics, Electronics, Light Engineering, Retail and Wholesale Business, Hotels and Restaurants, Financial Institutions, ICT Institutions, Construction Sector, Transportation sector, etc. were included in the survey.

The sixth phase of the Business Confidence Survey was completed between October 10 to 27 2021, in which 500 companies from all over the country had participated.

SANEM initiated the quarterly Business Confidence Survey in July 2020.

The first round of the survey (held in July’20) revealed the dire state of business in the country. The second (conducted in October’20) and third round (convened in January’21) showed signs of economic recovery.

The fourth round (held in April’21) exposed a deterioration of business confidence followed by the second wave of COVID-19, but fifth round (conducted in July’21) revealed an improvement of business confidence through nationwide mass vaccination programme.

However, continuously observing the response from businesses more or less confident about future prospects, is essential to gauge the effectiveness of the policies implemented by GoB (vaccination programmes, stimulus packages etc.) and bring about changes accordingly.

The sixth round of the survey was conducted nationwide in October 10-27, 2021 on 500 firms. This round of survey provides insights on economic recovery.

During the sixth round, there have been some visible recoveries of business activities. The improvement is visible in most of the sub-indicators of PBSI (year).

For the very first time, the overall PBSI (year) has crossed the 50 mark, indicating business activities are improving.

Likewise, PBSI (quarter) has shown an improvement of business activities in July-September 2021 quarter compared to April-June 2021 quarter. However, the overall PBSI (quarter) score is still low.

Academics, Policy Makers, Development partners and Journalists from various media of the country took part in the webinar.

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