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Bangladesh rating outlook stable: Standard & Poor's

Jun '19
Bangladesh rating outlook stable: Standard & Poor
US-based Standard & Poor’s (S&P) recently assigned ‘BB-‘ long-term and ‘B’ short-term sovereign credit ratings to Bangladesh, reaffirming a stable outlook because of solid growth path against fiscal constraints and heavy development needs. The growth will continue raising average income and prevail over risks to external metrics over the next 12 months, it said.

Bangladesh received the same rating and outlook from the global credit rating company since it first rated the country in 2010, according to Bangla media reports.

“The ratings on Bangladesh reflect the country’s low economic development and limited fiscal flexibility owing to a combination of constrained revenue-generation capacity, high debt-servicing costs, and heavy spending to improve its basic infrastructure and government services,” S&P said.

The country’s administrative and institutional weaknesses represent additional rating constraints, it said, cautioning that the country faces the vulnerabilities of a low-middle-income economy, fiscal constraints and heavy development needs, but benefits from low external debt and resilient economic growth.

The ratings may be raised if the government implements fiscal measures that strengthen future fiscal performances. Bangladesh’s political landscape constrains the effectiveness of institutions and impedes sound policymaking.

However, the economy continues to sustain high, steady economic growth supported by a competitive garment sector, it said.

The agency stated that given a weak institutional setting, infrastructure deficiencies and difficult business environment, Bangladesh’s foreign direct investment has remained persistently low.

S&P said the low economic development, as represented by per capita GDP of $1,900 for 2019, has been one of Bangladesh’s main rating constraints.

Despite the low income level and numerous structural impediments, particularly in infrastructure, S&P said, Bangladesh’s real per capita GDP growth of about 5.9 percent over 2013-2022 indicates consistently strong real economic growth.

“Garment exports and worker remittances are key anchors of Bangladesh’s strong external position but face risks from global factors and maturing of construction boom in host countries,” said the rating company.

Bangladesh tends to run moderate fiscal deficits, it said forecasting the change in net general government debt will average 4.2 per cent of gross domestic product annually over fiscal 2019-2022.

The rating agency projects net general government debt at 25 percent of GDP as of the end of the fiscal year on June 30, 2019. (DS)

Fibre2Fashion News Desk – India

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