RMG exports support Bangladesh credit profile: Moody's

13 Jun '17
2 min read

Bangladesh's (Ba3 stable) sovereign credit profile is supported by the robust growth of an economy that is bolstered by garment manufacturing industry exports, says a recent report. However, weakening inflows of remittances from overseas-based workers could hurt consumption. The RMG industry makes up about 70 per cent of Bangladesh's total exports.

The ready-made garment industry of Bangladesh also accounts for significant foreign investment inflows. While the agricultural sector is still the biggest employer in Bangladesh, the garment industry employs over three million workers and offers continued opportunity for labour productivity gains that will support future economic development and growth, according to the 'Government of Bangladesh - Garment Industry Sustains High GDP Growth But Lower Remittances Pose Downside Risks to Consumption' report by Moody's Investors Service.

"Bangladesh will continue to invest in its garment manufacturing sector to capitalise on its strong comparative advantage of abundant low-cost labour," said William Foster, vice president and senior credit officer at Moody's. "It will remain a leading global supplier of basic garments and the industry will continue to drive the nation's growth, exports and job creation."

The country's focus on low-value garment exports helps to insulate it from the impact of higher trade tariffs that could result from greater protectionism globally.

Nonetheless, while Bangladesh's garment industry benefits from some of the lowest wage levels in the world, the country's overall economic competitiveness lags that of its peers such as Vietnam (B1 positive), Cambodia (B2 stable) and Sri Lanka (B1 negative). When factoring in the quality of its physical infrastructure, skill levels and transparency of the business environment, the country's low competitiveness hampers the ability of its economy to absorb shocks, notes the report. (KD)

Fibre2Fashion News Desk – India

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