Bangladesh outlook stable, affirms Fitch Ratings

Fitch Ratings, one of the internationally acknowledged credit rating agencies, yesterday affirmed Bangladesh’s outlook to be stable. The rating agency also affirmed Bangladesh’s long-term foreign and local-currency Issuer Default Ratings (IDRs) at ‘BB-’. The outlooks on the long-term IDRs were also rated to be stable. The country ceiling was affirmed at ‘BB-’ and the short-term foreign-currency IDR was rated at ‘B’, according to a release issued by the agency itself.
According to the rating agency, Bangladesh’s rating balances strong foreign-currency earnings and stable real GDP growth against significant political risk and weak banking-sector health. Strong and relatively stable foreign-currency revenue from remittance and garments exports, two main pillars of Bangladesh’s economy, support the external balances and overall credit profile, the statement added. As per the rating, Bangladeshi exports have only been moderately affected by the current global trade slowdown.
The country’s exports grew 5.9 per cent over the year to January 2016, compared to 9.0 per cent a year earlier. Remittances also remained strong at $15 billion on an annual basis in February 2016, dwarfing the roughly $3 billion annual inflow of foreign project-based aid. At the same time, weak global conditions imply downside risks to foreign demand for exports and Bangladeshi workers abroad. Inflows, combined with Bangladesh Bank’s foreign exchange interventions aimed at keeping taka, the local currency, relatively stable against the US dollar, have led to a build-up of foreign reserves to a record-high of $28.3 billion in March 2016, the rating agency said.
The authorities’ macroeconomic track record was strengthened by Bangladesh’s successful completion in October 2015 of its Extended Credit Facility arrangement with the IMF. Real GDP growth remained relatively strong and stable over the past years, even during times of political turmoil and natural disasters. Bangladesh’s five-year average real GDP growth of 6.3 percent is high relative to the ‘BB’ category median of 4.0 per cent. Fitch expects growth to reach 6.7 per cent in the financial year to 30 June 2016 (FY16) and 6.8 per cent in FY17, slightly below the authorities’ forecasts of 7.1 per cent and 7.2 per cent respectively. Increased purchasing power from public-sector wage hikes and monetary policy loosening in January 2016 should support this growth. Inflation is also relatively high compared with peers, averaging 6.1 per cent in the first eight months of FY16, but close to the authorities’ target of 6.2 per cent set for the entire financial year. The return to relative calm after political violence erupting in the first quarter of 2015 is positive, but political risk remains substantial, the rating observed.

Bangladesh outlook stable, affirms Fitch Ratings

Fitch Ratings, one of the internationally acknowledged credit rating agencies, yesterday affirmed Bangladeshs outlook to be stable. The rating agency also affirmed Bangladeshs long-term foreign and local-currency Issuer Default Ratings (IDRs) at BB-. The outlooks on the long-term IDRs were also rated to be stable. The country ceiling was affirmed at BB- and the short-term foreign-currency IDR was rated at B, according to a release issued by the agency itself. According to the rating agency, Bangladeshs rating balances strong foreign-currency earnings and stable real GDP growth against significant political risk and weak banking-sector health. Strong and relatively stable foreign-currency revenue from remittance and garments exports, two main pillars of Bangladeshs economy, support the external balances and overall credit profile, the statement added. As per the rating, Bangladeshi exports have only been moderately affected by the current global trade slowdown. The countrys exports grew 5.9 per cent over the year to January 2016, compared to 9.0 per cent a year earlier. Remittances also remained strong at $15 billion on an annual basis in February 2016, dwarfing the roughly $3 billion annual inflow of foreign project-based aid. At the same time, weak global conditions imply downside risks to foreign demand for exports and Bangladeshi workers abroad. Inflows, combined with Bangladesh Banks foreign exchange interventions aimed at keeping taka, the local currency, relatively stable against the US dollar, have led to a build-up of foreign reserves to a record-high of $28.3 billion in March 2016, the rating agency said. The authorities macroeconomic track record was strengthened by Bangladeshs successful completion in October 2015 of its Extended Credit Facility arrangement with the IMF. Real GDP growth remained relatively strong and stable over the past years, even during times of political turmoil and natural disasters. Bangladeshs five-year average real GDP growth of 6.3 percent is high relative to the BB category median of 4.0 per cent. Fitch expects growth to reach 6.7 per cent in the financial year to 30 June 2016 (FY16) and 6.8 per cent in FY17, slightly below the authorities forecasts of 7.1 per cent and 7.2 per cent respectively. Increased purchasing power from public-sector wage hikes and monetary policy loosening in January 2016 should support this growth. Inflation is also relatively high compared with peers, averaging 6.1 per cent in the first eight months of FY16, but close to the authorities target of 6.2 per cent set for the entire financial year. The return to relative calm after political violence erupting in the first quarter of 2015 is positive, but political risk remains substantial, the rating observed.