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Bangladesh Country Risk Report Q1 2019

Bangladesh Country Risk Report Q1 2019

We are revising our real GDP growth forecast for Bangladesh to 7 5% (from 7 2% previously) in FY2018/19 (July-June), which still implies a moderation from the 7 9% growth rate registered in FY2017/18 We believe that the strong growth will likely be driven by investment and garment export growth over the coming quarters as garment manufacturers relocate their production facilities from competitor countries such as China and Sri Lanka Bangladesh's prospect of improved trade concessions with the EAEU will also support the growth of garment exports

We expect the Awami League (AL) to form the government at the upcoming general elections that are scheduled to be held on December 30 The intense rivalry between supporters of the AL and the Bangladesh Nationalist Party (BNP) will likely result in a rise in violence through and even after the elections, which will weigh on social stability We are therefore revising down Bangladesh's Short-Term Political Risk score down to 57 5 (out of 100), from 58 1 previously

We maintain our expectation for narrowing Bangladesh-US real interest rate differentials to put downside pressure on the Bangladeshi taka over the near term Over the longer term, the taka's overvaluation and Bangladesh's higher inflation relative to the US will likely see the taka underperform the US dollar in spot terms Given the recent price stability, we are revising our forecast for the taka to average BDT83 90/USD in 2018, and BDT86 00/USD in 2019 (from BDT84 00/USD and BDT88 30/USD previously)

Key Risks

Religious and social tensions remain elevated within the population and an escalation of communal violence and social instability could further weigh on the already-poor business environment and discourage investment Bangladesh Country Risk Q1 2019


Executive Summary
Core Views
Key Risks
Country Risk Summary
Economic Risk Index
Political Risk Index
SWOT
Economic – SWOT Analysis
Political – SWOT Analysis
Economic Outlook
Economic Growth Outlook
Bangladeshi Economy To Benefit From Woes Of Garment Producing Competitors
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Outlook On External Position
TABLE: MAIN EXPORT AND IMPORT PARTNERS
TABLE: MAIN EXPORT AND IMPORT PRODUCTS
TABLE: CAPITAL AND FINANCIAL ACCOUNT BALANCE
TABLE: CAPITAL AND FINANCIAL ACCOUNT BALANCE
TABLE: CURRENT ACCOUNT BALANCE FORECASTS
Monetary Policy Framework
TABLE: MONETARY POLICY FORECASTS
Structural Fiscal Position
TABLE: MAIN SOURCES OF REVENUE AND EXPENDITURE
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
Currency Forecast
Bangladeshi Taka To Weaken At A Gradual Pace
TABLE: CURRENCY FORECAST
Bangladesh Country Risk Q1 2019THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.Contents10-Year Forecast
The Bangladesh Economy To 2027
Long-Term Potential Strong But Restricted
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Political Outlook
Domestic Politics
Social Instability To Persist Even After Bangladesh's 2018 General Elections
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Still Much Room For Improvement
Operational Risk
TABLE: OPERATIONAL RISK
Economic Openness
TABLE: TARIFF AND NON-TARIFF TRADE BARRIERS
TABLE: FREE TRADE AGREEMENTS
TABLE: FREE TRADE ZONES AND INVESTMENT INCENTIVES
TABLE: BARRIERS TO FDI
Utilities Network
TABLE: ELECTRICITY RISKS
TABLE: FUEL RISKS
TABLE: TELECOMMUNICATIONS RISKS
TABLE: WATER RISKS
Global Macro Outlook
Continued Growth Divergence And Policy Risks Ahead
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES, REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS, REAL GDP GROWTH, % y-o-y
Index Tables
TABLE: BANGLADESH – MACROECONOMIC DATA AND FORECASTS

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