With hundreds of thousands of people dead and millions infected, the novel coronavirus is continuing to pose a grave threat to human lives, particularly to those with pre-existing conditions like hypertension, cardiovascular disease, or diabetes. Nevertheless, social distancing and lockdowns seem to be working and resulting in fewer hospitalisations and deaths. Yet, not all societies are following the same measures to combat the virus. For instance, Sweden isn't specifically practising social distancing. Instead, they have decided to live as business as usual and trying to cope with the pandemic situation as a new normal considering the fact that the virus isn't going away anytime soon. The result is not very promising as lately the number of deaths has spiked to thousands, whereas it remained within the range of hundreds in the neighbouring Nordic countries. On the other hand, China has shown that the virus transmission could be stopped through containment but at a substantial cost. Globally, the economic shock from COVID-19 could be severe compared to the financial crisis in 2008 or even to the Great Depression in the 1930s. The market has been defeated by the virus; nothing in human known history destroyed wealth as the virus has. Unless in the next few months, a solution such as a therapy, vaccine or perhaps a voodoo can prevent the virus to do anymore harm, the economy may not be the same again. The worst may come with the chain of economic transactions becoming broken because many of the debts may not be paid.
Today, while we have all been worried about our health and cowering down from the COVID-19 pandemic for some time, attention is beginning to turn to the economy. Any success in containing the virus has been found rather costly with a slowing down, if not completely stopping, of all economic activities, no matter if social distancing or reduced movement are imposed or voluntary. All around the world, people are now seemingly waiting to return to normal life followed by the good news that the COVID-19 pandemic is over.
Although I consider myself creative and open to fantasies, I could never have imagined that today, if you own an oil carrying vessel, after loading it to the top, rather than paying for that oil, you will collect money since oil has gotten unimaginable negative price. Due to meagre demand, oil became stranded in pipelines or onshore storages. Consequently, many oil tankers, filled with oil are seemingly stranded around the world since there is no capacity available to unload. Not only did it make the oil worthless but keeping it afloat also costs money. In modern history, the world has not witnessed such a sweeping reduction in the consumption of oil. The reason is not very difficult to understand because people are not flying anymore and have stopped buying oil as they are not driving. We don't need a better indicator to understand the extent of mutilation of global economy by the coronavirus.
It's not only oil, there would be an immense economic toll on every other sector and a global recession is expected. Significant losses would be incurred by the aviation industry; according to an estimate from IATA, revenue from this industry could plunge as much as by $252 billion. Agriculture sector would also suffer in enormous scale with probable disruption in food supply due to supply chain and labour issues. This would surpass the crisis in 2008 that dragged an estimated 130-155 million people into poverty. The impact on the shipping industry which constitutes the main artery of global trade would be massive with an estimated decline of 32 per cent or more in international merchandise trade.
As COVID-19 continues to spread across almost all corners of the world, tourism sector essentially came to a halt. According to the Organisation for Economic Cooperation and Development, the pandemic and its containment measures could cause the tourism industry to contract by 45-70 per cent, depending on how long the outbreak continues and how soon people start to travel. Another sector that has been hard hit by this virus is the education sector. Worldwide 192 counties have closed down all educational institutions disrupting studies for almost 1.58 billion students. The disruption has also impacted the jobs of more than 63 million elementary and secondary school teachers, as well as countless support staff. Many schools are now opting for virtual classrooms as a substitute.
The pandemic has caused a devastating blow for the apparel sector caused mostly by plummeting global demand and the challenges in sourcing raw materials. This will have a severe impact on an economy like Bangladesh, since RMG sector alone contributes 84 per cent of the nation's exports, employing close to 3.5 million people. According to the nation's RMG trade organisation, BGMEA, the buyers have already cancelled or put on hold more than $3 billion in orders from local apparel manufactures. This has impacted numerous jobs with more than a million layoffs or furloughs. Unless some drastic changes in the market take place, many factories will have to shut their doors permanently resulting in shocking impacts on the livelihood of workers and their families.
Besides the RMG sector, Bangladesh has seen the surge in unemployment from the so-called informal sectors triggered by the extended shutdown in an effort to contain the coronavirus transmission. About 12-15 million are out of jobs today, which is five times more than the figure known from the last Labour Force Survey in 2017. Many of them are day labourers, construction workers or rikshaw pullers without any savings for the rainy days. Although the Government of Bangladesh and several local NGOs have stepped forward to support them during this difficult time, the question we may ask-- how long and how much can an economy like Bangladesh sustain such a disruptive situation.
Along with the direct health risk from the coronavirus, the economic turmoil also carries other health related risks originating from starvation, domestic violence, substance abuse, or suicide. The economic stress is also drawing social unrests which in turn would impact law and order situations. So, it's not surprising that several European nations have started to resume economic activities while many other countries are considering to relax the lockdown. Pressure is also mounting to re-open the economy in Bangladesh.
Now the most critical question someone might ask is whether there is a tradeoff between the health and economic risks, or could we sensibly balance them. We cannot go back to work or send our kids to school without considering the risk of getting infected until and unless a vaccine is found and becomes available in our drug stores. Yet, there might be ways to normalise the economy with a very gradual but measured approach without rushing or in a haphazard manner. For example, a sector by sector approach where each one re-opens by phases. Each phase may also operate in alternate basis to help maintain the adequate social distancing. While we relax a part of economy, the other parts must continue with strict lockdown and so on. Any unnecessary or unwanted gathering must be discouraged and thwarted. We should not repeat the blunders committed by the RMG factories while re-opening the sector. Re-starting the economy is a hard decision as it involves the issue of saving lives. Therefore, the guidelines should be set up in consultation with health experts, economists and business leaders. Also, there must be consistency between "doing things" and "what's being said".
Sabbir Ahmad, PhD is a leader in project delivery and engineering.