China and Bangladesh are likely to lead the revival, at least in Asia, as global economies try to come out of the abyss they find themselves in due to the crisis caused by the coronavirus.
The economic recovery in China has been faster than expected, according to the International Monetary Fund (IMF) forecast for the global economic growth 2020.
It said the global economy also appears to be climbing from the lows witnessed in April when countries announced strict lockdowns to contain the spread of COVID. The recovery, however, is prone to setbacks, it warned.
The stringent lockdown imposed in most countries in the first half of 2020 to contain the spread of the COVID 19 was one of the main reasons for the recession, the IMF said. But, more importantly, voluntary social distancing in response to rising infections also contributed very substantially to the economic contraction. Therefore, easing lockdowns can lead to a partial recovery, but economic activity is likely to remain subdued until health risks associated with the pandemic abate, it said. Many countries have slowed reopening and some are even reinstating partial lockdowns and cyclical shutdowns as another wave of the pandemic sweeps through nations.
In Asia, the IMF forecasts the recovery will ride on the growth indicated by China and Bangladesh.
China on Monday (October 19) reported that its economic recovery accelerated in the third quarter as consumers shook off coronavirus concerns, although the weaker-than-expected headline growth suggested persistent risks going forward.
China’s economy grew 4.9% in the quarter compared with a year earlier, accelerating from 3.2 per cent growth in the second quarter, the National Bureau of Statistics (NBS) said.
Industrial production and retail sales grew by 6.9 per cent and 3.3 per cent, respectively, from a year earlier, reported Reuters.
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“China’s economy remains on the recovery path, driven by a rebound in exports. Consumer spending is also headed in the right direction, but we cannot say it has completely shaken off the drag caused by the coronavirus,” Yoshikiyo Shimamine, chief economist at Dai-ichi Life Research Institute, told Reuters. “There is a risk that the return of lockdowns in Europe and another wave of infections in the United States will hurt consumer spending and trigger more job losses, which would be a negative for China’s economy.”
The growth could be attributed to the “clever lockdown strategies that China adopted in the face of the pandemic and it did not have a one-size-fits-all kind of a blunt lockdown,” said Anand Srinivasan of the Indian National Congress. China’s economic recovery will lift surrounding Asian economies to a certain extent especially countries that have had a strong trade relationship with it like Bangladesh and Vietnam.
However an NBS spokeswoman also warned that growth remained patchy. The Chinese government had rolled out a raft of stimulus measures, including significant fiscal spending, tax relief and cuts in lending rates and banks’ credit reserve requirements, to revive the coronavirus-hit economy and support employment. Retail Indicators also show that consumer confidence has increased.
China’s economy has picked up after it reported a negative growth of 6.8 per cent in the first quarter of 2020, its first quarterly contraction since the cultural revolution of 1976.
The India vs Bangladesh debate
Media has been abuzz with the recent news that Bangladesh’s per capita income has overtaken India’s. The per capita GDP is the total gross domestic product (GDP) of a country divided by the population and is a measure of how rich the country’s citizens are on an average.
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Many consider this to mean the average income in Bangladesh is more than India’s and, hence, an average Bangladeshi is richer than the average Indian. That, however, need not necessarily be the case. The per capita income is in nominal terms (or current prices), which means it hasn’t been adjusted for inflation.
The headline inflation in Bangladesh since 2014 has been higher than India’s. In fact, as per the more reliable and now widely accepted yardstick called the Purchasing Power Parity (PPP), India is much ahead and will continue to remain far ahead of Bangladesh. However, this does not take away anything from the impressive growth recorded by Bangladesh’ economy.
“The currency (takka) of Bangladesh has appreciated nearly 30% against the dollar, thanks to a government that controlled its finances well and yet, at the same time, managed to take advantage of the global textile market,” says Anand Srinivasan spokesperson for the Indian National Congress and who closely tracks global markets.
While Bangladesh has not overtaken the Indian economy (on a per capita basis), the fact remains that it has been doing better than India on a whole host of non-income indicators like TFR, MMR, U5MR, education and labour, including female workforce participation rate. (Over the last two decades, Bangladesh has managed to narrow the gap on many parameters, especially on social, health, gender and work factors).
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“Bangladesh did not have the archaic British labour laws that Pakistan and India were forced to inherit due to legacy issues. In the 1970’s, even with a Left of centre government, they had very flexible labour laws and less governmental interventions,” says Anand Srinivasan.