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Fitch says Bangladesh outlook stable
31
Aug '15
Global credit-rating agency Fitch has projected Bangladesh's economic outlook as stable for the current year also, but with a footnote that political and banking-sector risks remained on the flip side, a leading Bangladeshi newspaper has reported.

Bangladesh is rated 'BB' which stands for a stable outlook, according to the Fitch Ratings latest report, released last week.

The rating agency has affirmed the country's long-term foreign and local currency issuer default ratings (IDRs) at 'BB'. The long-term IDRs are stable.

The country ceiling is affirmed at 'BB-' and the short-term foreign-currency IDR at 'B'.

Fitch rated Bangladesh's outlook as stable for a second consecutive year.

"Bangladesh's rating balances high, stable real GDP growth and persistently strong foreign-currency earnings from remittances and garment exports, against weak structural features, most prominently significant political and banking-sector risk," the agency explained.

It also said the country's real GDP growth is high at a five-year average of 6.3 per cent compared with the 'BB'-category median of 4.3 per cent.

"GDP growth has been remarkably stable over the years when Bangladesh was hit by both political turmoil and natural disasters," it noted.

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, according to the agency.

Fitch expects growth to reach 6.5 per cent in the financial year to 30 June 2016 (FY 16) and FY 17.

"Strong political polarisation is negative for Bangladesh's credit profile," it observed.

The agency observed 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.

The main risk to the sovereign credit profile is that the political turmoil would deter foreign investors and buyers, especially of readymade garments, from doing business in Bangladesh, thereby inflicting long-term harm on the economy, according to the Fitch forewarning.

"The banking sector is vulnerable to shocks, as both asset quality and governance are weak, especially in state-owned banks," the rating agency noted.

It further said, "The Bangladesh Bank seems committed to strengthening the poor governance in the banking sector.

Bangladesh scores poorly on a broad range of governance indicators, including the World Bank governance indicator, it pointed out, adding that the general level of development remains low, as illustrated by weak United Nations human development indicators. (SH)

 

Fibre2Fashion News Desk – India

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