The COVID-19 pandemic has severely impacted Bangladesh's economy, especially the critical readymade garment (RMG) industry. Exports from the RMG sector declined by nearly 17% in 2020 due to canceled orders from major importing countries in Europe and America. Millions of RMG workers lost their jobs or were furloughed as factories closed during lockdowns. While garment exports rebounded somewhat in mid-2020, the long-term impacts of the pandemic on the RMG industry and Bangladesh's economy remain uncertain. The study recommends government assistance and policy responses to mitigate damage to the RMG sector and prevent broader economic and social crises.

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Assignment On
COVID-19 IMPACT ON BD ECONOMY: STUDY FOCUS ON
READYMADE GARMENT (RMG) INDUSTRY
Course Title:
Financial Management (BUS 404)
Submitted To:
Ms. Amreta Biswas
Lecturer
Department of Business Administration
Central Women’s University
Submitted By:
Farjana Akhter
ID: 2018-2-16-005
Department of Bachelor of Business Administration
Spring-2021
Date of Submission
May 22, 2021

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INTRODUCTION
The novel coronavirus disease that was first reported in Wuhan, China in
December 2019 (COVID-19) is quickly spreading around the world. As of March
27, 2020, the total number of cases exceeds 460,000 and the disease has claimed
more than 20,000 lives globally. Since March 2020, while new cases in China
appear to have settled down, the number of cases is exponentially growing
in the rest of the world(Toda, 2020). COVID-19 pandemic is economically
speaking hit nations both economically dominant nations as well as economically
dependent nations. The number of COVID-19 case is already many fold larger
than the number of SARS cases in the previous pandemic (Baldwin et al., n.d.).
This already focused on that COVID-19 is spreading human suffering worldwide.
As the public health crisis is highly associated with economic affairs as like as
global public health, economy, and livelihood issues, it has grappled the global
economy exponentially towards the dramatic downturn that pushed it into the
worst recession after the great depression of the 1930s (Ali, Bhuiyan, Zulkifli, &
Hassan, 2020). It is most definitely spreading economic suffering worldwide.
The virus may be as contagious economically as it is medically (Baldwin et al.,
n.d.). The potential impact of COVID-19 on global monetary poverty through per
capita household income or consumption contraction. The impact will spread on
among low, medium, and high-income people (Sumner et al., 2020). The other
influential discussions over monetary and fiscal policy responses to the COVID-
19 epidemic and the ensuing economic fallout (Guerrieri et al., 2020). The
looming economic crisis may create panic, mass unemployment, poverty,
and homelessness. The coronavirus disease (COVID-19) has critically impacted
global health systems and economies, especially in developing countries.
The economic implications related to COVID-19 in those countries include a high
cost of care, market failures in pluralistic health systems, high out-of-pocket
expenses, the added burden of non-communicable diseases, missed economic
opportunities, and socioeconomic consequences like unemployment and poverty
(Rodela et al., 2020). The global pandemic has also made an impact on the
overpopulated developing country Bangladesh. In Bangladesh, the Institute of
Epidemiology, Disease Control and Research (IEDCR) has reported the first 3
cases of coronavirus on 8 March 2020. Currently, the country has a total of
3,37,520 coronavirus cases with 4,733 deaths (September 14, 2020)(IEDCR).
To combat, Bangladesh has employed international travel bans and a gradual
lockdown. However, countries like Bangladesh are at a greater risk because of
large population density, inadequate infrastructure, and healthcare systems to

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provide the required support(Ma et al., 2020). Bangladesh is one of the most
vulnerable countries due to high population density (170 million people in
147,000 sq.km), poor health care systems, and a weak economy. In recent years,
Bangladesh's economy has been growing well with a GDP growth rate of more
than 7.5%, however, 20% of the population is poor. Nevertheless, because of
the rapid spread of the COVID-19, Bangladesh's economy has already started
taking a big hit. The nationwide shutdown has already suspended almost all
economic activities except agriculture and made thousands of employments at
risk. International trade orders, especially in ready-made garments industries,
are being greatly canceled (M. T. Islam et al., 2020). Most of the people in our
country live below the poverty line. Due to lockdown since March 8, 2020, the
people are passing an overwhelmingly stressful moment. If the lockdown process
continues for longer many people would face severe starvation. The economic
strength of the country is also deteriorating day by day. The rate of
unemployment increases day by day. Though govt. takes initiatives to tackle
these pandemic situations by various promotional packages to the entrepreneur,
but the recent situation has not improved so much because of banning
international trade. Our most promising export sectors e.g. labor; garments, fish,
etc. are passing hazardous moments. In such circumstances, this paper tries to
summarizes of available resources to review of possible impacts of Covid-19 on
the economic indicators in Bangladesh, especially readymade garments, foreign
remittance, local trade, international trade, government revenue, employment,
financial institutions, production, and distributions due to the isolation,
quarantine, distancing, and shutdown measures. Therefore, the main purpose
of this study is to make review and evaluations of the potential impact of
COVID-19 on the economy of Bangladesh.
BACKGROUND
The first case of COVID-19 was identified in Bangladesh on March 8, 2020, and
the first death from the virus was recorded on March 18. COVID-19 has severely
damaged the global economy in addition to taking its toll on health and human
life. The world is going through a deep recession, which is expected to leave
lasting scars on the economic and financial indicators. The World Bank (2020a)
predicts that most countries are expected to plunge into recession in 2020
because of COVID-19. The advanced economies are expected to contract by 7
percent. The emerging and developing economies are anticipated to contract by
2.5 percent, which is the first contraction for these countries as a group in the

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last sixty years. In fact, the world has already experienced the fastest and
steepest downward adjustments in its growth projections since the 1990s.
Therefore, governments across the world are undertaking urgent actions to
cushion the pandemic’s immediate economic consequences and comprehensive
reform programs for long-term economic recovery alongside health recovery.
Like other countries, the immediate response of the Bangladeshi government to
prevent the spread of COVID-19 was to shut down the economy. The
simultaneous responses of the governments across the world resulted in a partial
shutdown of the global economy, which brought this unprecedented global
recession. Recent global economic trends indicate a fragile and uneven recovery
from the impact of the pandemic. As the economy of Bangladesh heavily relies on
the global supply chains, particularly ready-made garments (RMG) and foreign
remittance, the country has faced a severe impact of the global economic
meltdown (Amit, 2020).
More specifically, the exposed vulnerabilities of the cross-country supply
chain of RMG has hard hit the economy of Bangladesh because this sector brings
more than 80 percent of the export earnings. As the banks in Bangladesh heavily
depend on the business brought by the RMGs, COVID-19 has also seriously
affected the banking sector. Similarly, remittance sent by the Bangladeshi
diaspora, around 10 million workers, is another important pillar of the country’s
economy. This sector has already been hit by COVID-19 and recovered smoothly.
However, it is expected to be hit harder due to the second wave of the pandemic
and resultant travel restrictions, economic showdowns, and curfews in host
countries. Because of the close connection of the economy of Bangladesh with the
US and EU economies, the slowdown in those economies has long had ripple
effects on the Bangladesh economy (Rabbi, 2020). During the global financial
crisis in 2008, the correlation between the GDP growth rate of the Bangladesh
economy with those of US and EU economies was evident; it mirrored the growth
rate in those economies, though to a lesser extent. In addition to the recent
impact of the global economic meltdown, Bangladesh also experienced severe
demand contraction in the local economy; this exacerbated the overall economic
crisis of the country. Considering the duration and severity of COVID-19, we
examine its impact on major economic and financial indicators of the Bangladesh
economy and recommended policy responses for recovery, based on the analysis.
The paper’s outline is as follows. The following section provides an update on the
COVID-19 situation with a contextual perspective of Bangladesh. We then
provide a structure of the Bangladesh economy, followed by data, discussion and
conclusion respectively.

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BEFORE COVID-19 SITUATION OF RMG SECTOR
RMG exports have contributed $34.13 billion to Bangladesh’s total export
earnings this year, growing by 11.49% compared to last fiscal year. According to
Export Promotion Bureau (EPB) data, the RMG sector has contributed 84.21% to
Bangladesh’s total exports of $40.53 billion, growing by 10.55% in FY19. The
figure-1 depicts that in last
5 years the RMG exports
added additional 10 billion
dollars in the export basket
that means growing at a rate
on average 2 billion each
year. Though the growth
rate is impressive it is too
optimistic to reach 50
billion marks by 2021 which
is the target set by the
government.
The export growth rate is 11.49% which was only 8.76% in 2017-18 indicates
the upward trend of RMG export after the disastrous year in 2016-17 when the
RMG export growth was
the slowest in the history
at 0.2%. (Figure-2)
The export of knit and
woven products seems
evens to even growing at
a similar rate, however,
woven export has
surpassed knit export in
terms of value in the past 5-6 years. This year also the woven exports stood at
17.24 billion USD whereas knit exports stood at 16.88 billion USD. (Figure-3)

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According to Research
Director of CPD, in the
beginning of the year, the
govt. projected single
digit growth but there is
a double digit growth
which is a positive sign
for the RMG sector.
However, if on average
10% growth is predicted
in the upcoming two fiscal
years, the total RMG exports will stand at 37.54 billion in 2019-20 and 41.29
billion in 2020-21 which is shy by 8.71 billion USD compare to the ambitious
target of 50 billion set by the government of Bangladesh.
In terms of textiles
export however, the
scenario isn’t pleasant.
In FY19, the specialized
textile sector has had a
positive growth of
28.51% to $144 million
from 112.15 million
while the home textile
sector saw a negative
growth of 3.07% to
$851.72 million, down
from $878.68 million in the last FY. (Figure-4)
Among other major sectors, Jute and jute goods have contributed 21.83%
negative growth to $695.52 million which was $889.74 million during the same
period in the previous fiscal year of FY19 Negative growth in home textiles and
jute goods is an alarming issue for the country as these industries are more value
adding industries when compared to RMG. Agricultural products exports
meanwhile stood at $722.73 million by 53.05% growths from $472.23 million in
the last year.

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AFTERCOVID-19 SITUATION OF RMG SECTOR
Bangladesh's garment manufacturers and workers are suffering as the
coronavirus pandemic has soured long-term demand and big fashion brands
continue to cancel orders.
Global demand for clothing plummeted amid the COVID pandemic and big
fashion brands remain reluctant to place big orders, posing a major problem for
Bangladesh's vital textile industry.
A huge drop in the shipment of readymade garments due to declining orders in
the face of the coronavirus pandemic was the biggest factor behind a 14.57
percent fall in exports from Bangladesh last year.
The first lockdown caused unprecedented disruption between March and May,
when billions of US dollars’ worth of exports were cancelled or postponed,
threatening the country's garment industry which is responsible for more than
80 per cent of exports.
In 2020, textile exports from the South Asian nation dropped by nearly 17%.
Shipments to Europe, which is the destination for 60% of Bangladesh's garment
exports, recorded a significant decline of just fewer than 19%.
The RMG sector is on the verge of an unprecedented humanitarian and business
catastrophe. To flatten the coronavirus spread curve, the government declared
nation-wide holidays up to 25 April 2020 and business and industrial activities
have come to a grinding halt except emergency services. Many international
buyers are cancelling or postponing confirmed procurement orders as their retail

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outlets are substantially closed in Europe, North America, Asia and elsewhere.
According to Bangladesh Garment Manufacturers and Exporters Association
(BGMEA), international buyers have either cancelled or suspended $3.16 billion
worth of shipments involving 1,142
factories affecting 2.26 million
workers as of 18 April 2020. Millions
of workers stare at joblessness as
new orders dried up given the
collapse in global demand for
apparels. Reportedly, 1 million
workers have already been fired or
furloughed. According to a survey
conducted by the BRAC University,
47% RMG workers reported not
receiving their wages and felt
uncertain about their current job
status with their respective employers.
Defying government lockdown, thousands of RMG workers have demonstrated
on the streets throughout the country demanding arrear wages.
In the export figures of July when
Bangladesh earned $3.24 billion
from apparel shipment though the
amount is 1.98% lower than a year
earlier. However, garment export
receipts in July are 14.18% higher
than the monthly target of $2.84
billion. Of the total garment
shipment, knitwear exports grew
4.30% year-on-year to $1.75 billion
while woven exports fell 8.43% to
$1.49 billion, according to data from
the Export Promotion Bureau. Earnings from apparel shipment in April, May and
June stood at $0.37 billion, $1.23 billion and $2.28 billion respectively.
New figures from the Export Promotion Bureau reveal that the country’s export
earnings in 2020 fell to US $33.60 billion from US $39.33 billion in the previous
year as the COVID-19 outbreak hit the global economy. Bangladesh is hugely
dependent on the export of textiles for its national income as the industry
accounts for more than 80% of overall exports.

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RECOMMENDATIONS
The RMG industry is a key contributor to other economic sectors, such as,
banking, insurance, real estate, packaging, hotels, recycling, consumer goods,
utility services and logistics. A World Bank survey revealed that 98% of RMG
factories are clients of commercial banks. All machines and plants are insured
with insurance companies and, additionally, 87% importers and 15% exporters
get their imports/exports insured with insurance companies. It is estimated that
port usage fees earned from the RMG sector account for more than 40% of the
income of the port authority. The 4.1 million workers in the industry have also
created a large demand for low-cost consumer goods, such as cosmetics, dresses,
footwear, utensils and other products. The looming crisis in the RMG industry
will have a multiplied chain reaction on the whole economy and salvaging this
industry will be beneficial to other sectors as well.
CONCLUSIONS
The impact of COVID-19 has just started to unfold and will evolve fast. The full
impact will be more visible in the next few months or beyond. In order to
mitigate the impending economic and potential social crisis, it is needed to stay
ahead of the curve and get ready with appropriate emergency assistance and
post-crisis assistance in different forms as appropriate. The impact of COVID-19
extends well beyond the RMG industry to other economic sectors. Assistance to
the RMG industry, which is the largest contributor to urban poverty reduction,
may help other associated sectors in the supply chain and normalize the
economy significantly and faster.
The study revealed that the magnitude of the economic losses will depend on
how the outbreak evolves as any pandemic diseases and its economic
consequences are vastly ambiguous which makes it challenging for
policymakers to work out an axiomatic and appropriate macroeconomic
policy guideline. Therefore, right and effective policies, initiatives, coordination
and awareness buildup are inevitable to avert the severity of the crises to
overcome this pandemic, and an unprecedented wake-up call and
coordinated efforts are inevitable governments, and private organizations.
Finally, the study suggested that as Covid-19 still surfacing all over the world
so some steps should be ensured by the government agencies of Bangladesh to
mitigate possible threats for the economy.