• Thursday, Jun 30, 2022
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The Economist: Bangladesh economy relatively safe from Covid-19 fallout

  • Published at 09:43 pm May 2nd, 2020
RMG factory
File Photo: A group of women working at a garment factory in Bangladesh Claudio Montesano Casillas

Bangladesh is ahead of India, Pakistan and Sri Lanka

Bangladesh has been listed as the 9th strongest economy according to The Economist’s report on the financial strength of the 66 emerging economies in the wake of the Covid-19 fallout. 

The ranking examines the vulnerability of selected economies across four potential sources of peril—public debt as percentage of GDP, foreign debt (both public and private), cost of borrowing and reserve cover.  

According to the ranking, the economy of Bangladesh has featured as strong or relatively strong in all said indicators.

Botswana tops the list of countries with the strength of its indicators while Venezuela fared as most vulnerable. 

Bangladesh, Botswana apart other emerging economies those made it to top 10 are, Taiwan, South Korea, Peru, Russia, the Philippines, Thailand, Saudi Arabia and China.

Bangladesh has fared better than three of its South Asian neighbours — India ranked 18th, Pakistan 43rd and Sri Lanka 61st.    

The Economist report, ‘Which emerging markets are in most financial peril’, says its ranking of 66 countries shows which are in distress and which are relatively safe.  

It says Covid-19 hurts emerging economies in at least three ways: by locking down their populations, damaging their export earnings and deterring foreign capital. 

Even if the pandemic fades in the second half of the year, GDP in developing countries, measured at purchasing-power parity, will be 6.6% smaller in 2020 than the IMF had forecast in October, states the report. 

“The damage to exports will be acute. Thanks to low oil prices, Gulf oil exporters will suffer a current-account deficit of over 3% of GDP this year, the IMF reckons, compared with a 5.6% surplus last year. When exports fall short of imports, countries typically bridge the gap by borrowing from abroad. But the reversal of capital inflows has been matched by higher borrowing costs.” 

To weather the crisis, the report states, emerging economies may need at least $2.5trn, the fund reckons, from foreign sources or their own reserves. One way to ensure countries have more hard currency is to stop taking it from them. 

The G20 group of governments has said it will refrain from collecting payments this year on its loans to the poorest 77 countries (though the borrowers will have to make up the difference later). 

The Economist calculated the 66 emerging economies’ likely foreign payments this year (their current-account deficit plus their foreign-debt payments) and compared this with their stock of foreign exchange reserves. A country’s rank on each of these indicators is then averaged to determine its overall standing.

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