Bangladesh’s gross domestic product would grow 6.5 percent in the current fiscal year 2015-16 against the Bangladesh government’s target of 7 percent, forecasted Fitch, a leading global credit rating agency.
The latest outlook of Fitch, released on Friday said, “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 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 UN 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.