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NAME ID
Menhajur Rahaman 162011062
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INTRODUCTION
The ongoing spread of the new coronavirus has become one of the biggest threats to the global
economy and financial markets. The COVID-19 pandemic has wreaked havoc on the world
economy and cast a staggering gloom over growth prospects far and wide, incurring a short-term
collapse in global output and widening tolls on various industries and the masses. Economies
around the world have been suffering internal and external shocks on both supply and demand
sides with production chains disrupted, global trade almost put on hold, as well as consumer and
investor sentiment gravely dampened. Consequently, unemployment rates worldwide have
reached new heights. Bangladesh economy will be significantly infected by the corona virus
pandemic, the update said. Transmission of the expected global economic meltdown on
Bangladesh economy initially form the supply stock. Bangladesh will be face lack of exports,
unemployment, and social imbalance on this crisis movement.
The corona virus outbreak is having a serious ripple effects throughout global supply chains.
Factories have shutdown, product flow in many cases has come to a halt, and consumer purchases
of all but the most essential items are less available. Consequently the global economy is receiving
its sharpest reversal since the great depression. The virus has now infected over 10 million people,
and the death of more than 1 million. Besides its worrying effects on human life, the novel
coronavirus (COVID-19) has the potential to significantly slowdown not only the Chinese
economy but also the global economy. China has become the central manufacturing hub of many
global business operations. Any disruption of China’s output is expected to have repercussions
elsewhere through regional and global value chains. Indeed, most recent data from China indicate
a substantial decline in output. China Manufacturing Purchasing Manager’s Index a critical
production index, fell by about 22 points in February. This index is highly correlated with exports
and such a decline implies a reduction in exports of about 2 percent on an annualized basis.
Indicators on shipping also suggest a reduction in Chinese exports for the month of February.
Container vessel departures from Shanghai were substantially lower in the first half of February
with an increase in the second half. However, the Shanghai Containerized Freight Index continues
its decline thus indicating excess shipping capacity and lower demand for container vessels.
During the last two decades China has become crucial to the global economy. China’s rising
importance in the global economy is not only related to its status as a manufacturer and exporter
of consumer products. China has become the main supplier of intermediate inputs for
manufacturing companies abroad. As of today, about 20 percent of global trade in manufacturing
intermediate products originates in China. China has become the central manufacturing hub of
many global business operations. Any disruption to China's output is expected to have
repercussions elsewhere through regional and global value chains. Indeed, the most recent data
from China indicates a substantial decline in output, the report said. China Manufacturing
Purchasing Manager's Index a critical production index, fell by about 22 points in February. This
index is highly correlated with exports and such a decline implies a reduction in exports of about
2.0 per cent on an annualized basis, it added. In other words, the drop observed in February spread
over the year is equivalent to -2.0 per cent of the supply of intermediate goods, according to the
report. The methods used in this note are meant to identify the economic sectors and countries that
are most exposed to a disruption of China's exports of intermediate inputs, the report revealed.
China's rising importance in the global economy is not only related to its status as a manufacturer
and exporter of consumer products. China has become the main supplier of intermediate inputs for
manufacturing companies abroad. While the coronavirus has an obvious effect on commerce in
Chinese cities which are heavily affected by it, it has also caused countless travel cancellations in
Asia and beyond, the closing down of casinos in Macao, a prolonged new year’s break for Chinese
stock markets and the cancellation of important trade fairs and sporting events in the region, all
contributing to money lost for local and global economies. According to an analysis by Deutsche
Bank, the effects of the coronavirus will lower global GDP growth in 2020, the effect radiating as
far as Europe and the U.S. and even setting back global growth forecasts by 0.2 percent.
EFFECTS ON GLOBAL CAPITAL MARKETS:
The global stock markets appear to be in a long-term economic downturn from the novel
coronavirus (COVID-19) outbreak, which has now spread rapidly from the world's second-largest
economy, China, to all the continents. Indexes of international capital markets plummeted
drastically during January and February as COVID-19 continued to spread, raising fears that the
epidemic will wipe out corporate profits and push some of the world's biggest economies in
recession. Companies around the world are cutting production and cancelling conferences to limit
the outbreak's spread.
It is clear from table-I that international capital market experienced sharp fall in their indexes of
different types during January-February 2020. According to the data, US equities gave lacklustre
returns as reflected in the indexes S&P 500, Dow Jones Industrial Average and NASDAQ
COMPOSITE INDEX during this time span. The fall of the Dow Jones Industrial Average and
S&P 500 in the US wiped out gains for the companies. Firms such as Nike, Apple and Walt Disney,
which do major business in China and rely on it to make goods, were some of the hardest hit, with
shares down more than 4.0 percent.
2. HOW BANGLADESH WILL BE AFFECTED:
Few weeks ago, people of Bangladesh were living peacefully, travelling freely, doing their jobs
perfectly; the economic growth projections were cheery and the financial market. But the novel
coronavirus or Covid-19 has brought a dramatic slowdown in the overall life style and economy
of the world where Bangladesh became a victim too. The exponential spread of the virus and its
deadly effect made it clear that it has the potential to wreck the economy. Since the attack of this
virus in Bangladesh is a very recently identified case with very low scale, questions may arise
whether this will affect us economically. The answer is very simple. When giant economies like
US, China, Japan, Germany, Britain, France, and Italy are affected, the rest of the world will not
be spared from the blow as these economies carry almost 60% of world supply and demand in
terms of GDP, 65% of world manufacturing and 41% of manufacturing exports, as per a report of
the World Trade Organization published in 2020. Global economy is connected through cross-
border flows of good, services, people, know-how, financial capital, foreign direct investment,
exchange rates and international banking. As a consequence, Bangladesh will experience a slow
growth in its economy as the USA, UK and Germany are the main importers of its products
specially clothing and leather products and China is among the main investors for mega
development projects. Thus, this virus will bring economic shocks. Tangible economic shocks can
be categorized into two: firstly, purely medical shocks – as the affected persons cannot contribute
to GDP and secondly, the economic impact of public and private containment measures – things
like school, office and factory closures, travel restrictions, and quarantines. Bangladesh will face
an economic shock by declining export and tourism revenue in a large-scale due to restricted export
policies and travel bans. There are mainly three reasons that can hinder the economic activities in
Bangladesh such as, direct impact on production, supply chain and market disruption as well as
impact on firms and financial markets. Financial sector, specifically the banking sector in
Bangladesh, can be the most affected sector. This is because banks were the heart of all crises such
as sovereign euro crisis and the global financial crisis. If banks fail, the Small and Medium
Enterprises (SMEs) will be more affected.
Bangladesh government and the central bank must make sure that interrupted economies continue
to function amid the virus outbreak. In this regard, government should instruct the financial and
non-financial institutions, educational institutions, and all government and non-government
institutions to set up cloud-based work at home facilities so that they can continue their smooth
operation during such occurrences. While cutting interest rates is a possible response for
Bangladesh bank, the shock is not simply a demand management problem but a multi-faceted crisis
that will require monetary, fiscal and health policy responses. The increased government spending
should be first directed to the health sector for supporting all essential expenditure on prevention.
To stimulate the motivation of those health care personnel and considering the safety of the people,
the government should declare a health insurance policy. Supporting vulnerable households and
firms is essential as containment measures and the fear of infection can cause sudden stops in
economic activity. The increasing liquidity buffers to firms in affected sectors is also necessary to
avoid debt default. In addition, reducing fixed charges and taxes and credit forbearance would also
help to ease the pressure on firms facing an abrupt falloff in demand. Finally, the government,
oppositions, the NGOs, the other social organizations, the business people, the financial and non-
financial institutions, and the people of Bangladesh should come forward and work together to
handle this pandemic and minimize both the economic and non-economic losses.
In this table we describe 9 major industry that products export several countries. This encourage
the GDP. Bur although Bangladesh export trade mainly depends on some traditional goods like
jute and jute goods, leather, shrimps, garments and other fishes etc. We visualize the front line
export industry in bellow pie chart.
Garments factories in Bangladesh have now had orders worth more than US$2 billion cancelled
by brands and retailers because of the global coronavirus crisis. Orders for nearly 650 million
garments, worth a total of US$2.04 billion have been cancelled, impacting on 738 factories and
about 1.42 million workers, according to the Bangladesh Garment Manufacturers and Exporters
Association (BGMEA). Garment exports accounted for $34.12 billion, or 84% of the country's
overall exports of $40.53 billion, in the fiscal year ended June 30, 2019. Bangladesh has lost more
than $3 billion due to the crisis. All our orders until July have been cancelled or suspended.
Finally, the government, oppositions, the NGOs, the other social organizations, the business
people, the financial and non-financial institutions, and the people of Bangladesh should come
forward and work together to handle this pandemic and minimize both the economic and non-
economic losses.
5. FORCAST THE EXCHANGE RATE OF BDT WITH RESPECT TO USD FOR
ONE MONTH (END OF APRIL)
For fundamental forecasting we have to account the variables such inflation, interest rate, income
level and government control. Due to the Covid19 pandemic Bangladesh might face inflation as
most of the people panic buying goods form their local store, this will put pleasure on the supply
of goods available in the market. As a result the local goods might more expensive than the foreign
goods. Which will face the consumer to import more of the chipper goods form the foreign
markets. Presently the income level of Bangladeshi people is lower due to quarantine lockdown.
Therefore the buying capacity of Bangladeshi people is decreased. It also effected the export of
Bangladesh. For that it is also harmful for our GDP. The chain of events form the lockdown
resulted in both the export and import of our country to decreases significantly and the best case
scenario form this is that the less number of export and import will cancel each other but in the
worst case scenario the value of the local currency will decreased.
CONCLUTION:
Corona virus pandemic on international trade is huge. Lots of poor country will face economic
crisis. Per capital income will reduce of poor country. Many advanced country cannot find the way
to minimizing the economic risk. People socioeconomic income will be reduce. But the economist
predict the world may turn around once coronavirus pandemic is over. The international trade and
economy will be return. In addition Bangladesh will be also prosperous by compensating loss for
the covid19 pandemic.
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