Credit agency fore­casts sta­ble GDP growth for Bangladesh

The China Post - - BUSINESS - RE­JAUL KARIM BY­RON

Fitch, a lead­ing global credit rat­ing agency, forecast Bangladesh’s gross do­mes­tic prod­uct would grow 6.5 per­cent in the cur­rent fis­cal year against the Bangladesh gov­ern­ment’s tar­get of 7 per­cent.

Fitch on Fri­day re­leased its latest out­look, say­ing: “Bangladesh’s rat­ing bal­ances high, sta­ble real GDP growth and per­sis­tently strong for­eign-cur­rency earn­ings from re­mit­tances and gar­ment ex- ports, against weak struc­tural fea­tures, most promi­nently sig­nif­i­cant po­lit­i­cal and bank­ing-sec­tor risks.”

Fitch as­signed the coun­try a long-term credit rat­ing of BB- and a short-term rat­ing of B and a coun­try ceil­ing of BB-, which was the same as a year ago.

“Bangladesh’s real GDP growth is high at a five-year av­er­age of 6.3 per­cent com­pared with the BB cat­e­gory me­dian of 4.3 per­cent.”

Fitch said GDP growth has been re­mark­ably sta­ble over the years when Bangladesh was hit by both po­lit­i­cal tur­moil and nat­u­ral dis­as­ters.

The se­vere po­lit­i­cal tur­moil in the first quar­ter of 2015, in which more than 100 peo­ple were killed, had a rel­a­tively small im­pact on the of­fi­cial GDP data, Fitch said.

It said strong po­lit­i­cal po­lar­iza­tion is neg­a­tive for Bangladesh’s credit pro­file. Nor­malcy has re­turned to the streets for now, but af­ter two con­sec­u­tive years marked by months of se­vere po­lit­i­cal vi­o­lence, block­ades and gen­eral strikes, a re­cur­rence or es­ca­la­tion can­not be ruled out.

Fitch said the main risk to the sov­er­eign credit pro­file is that the po­lit­i­cal tur­moil would de­ter for­eign in­vestors and buy­ers, es­pe­cially of gar­ments, from do­ing busi­ness in Bangladesh.

Bangladesh scores poorly on a broad range of gov­er­nance in­di­ca­tors, in­clud­ing the World Bank gov­er­nance in­di­ca­tor (21st per­centile ver­sus the BB me­dian of 46th per­centile), it said.

The gen­eral level of de­vel­op­ment re­mains low, as il­lus­trated by weak U.N. hu­man de­vel­op­ment in­di­ca­tors.

How­ever, Fitch said Bangladesh reached the World Bank’s lower mid­dle-in­come coun­try sta­tus in July 2015, but GDP per capita of US$1,297 re­mains well be­low the BB peer cat­e­gory me­dian of US$4,473.

It also said the coun­try’s rev­enue in­take of 10.8 per­cent of GDP is the low­est of all rated coun­tries with the ex­cep­tion of Nige­ria, im­ply­ing lim­ited fis­cal space for cap­i­tal ex­pen­di­tures.

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