Bangladesh to overcome Covid impact in one year, S&P predicts

Global Rating agency Standard and Poor's (S&P) said despite several challenges, Bangladesh's flourishing economic growth will overcome the loss due to the Covid-19 pandemic over the next one to two years.

Confirmed a BB- long term rating for Bangladesh, S&P said Bangladesh per capita income was low and debt service costs were relatively high, reports the economynext.

“We weigh the evaluating factors against consistently fast economic growth and a balanced external position, reflecting substantive engagement with bilateral and multilateral development partners, large remittances from overseas Bangladeshi citizens back to the country, and a globally competitive garment sector,” the rating agency said.

Bangladesh’s economic recovery momentum will continue to build over the next one to two years following a real expansion of 5.5 per cent in the fiscal year ended June 2021, S&P said in a statement. 

Bangladesh’s severe Covid-19 outbreak may act as a near-term brake on economic activity, but the impact is unlikely to derail the nascent recovery, S&P added.

On the other hand, S&P fears Bangladesh’s highly concentrated domestic political conditions may undermine the predictability of future policy responses.

"Bangladesh’s fiscal deficit is likely to remain elevated this year owing to some additional pandemic-related expenditure, along with the government’s modest revenue performance. We forecast the associated change in net general government debt to average 5.6 per cent of GDP annually over fiscals 2022-2024," S&P statement read. 

Despite higher pandemic spending and continued efforts to boost capital expenditure over recent years, many basic social and infrastructure needs in Bangladesh remain unmet, implying a higher potential expenditure burden in the future.

Although the private sector banks are in better shape, there are notable risks in the state-owned commercial banks (SOCBs). SOCBs account for less than 30 per cent of total banking sector assets, and their nonperforming loans ratio is considerably higher than that of peer commercial banks.

Bangladesh’s credit profile benefits from low external borrowings. The country has large remittance inflows and an internationally competitive garment export sector, resulting in a generally modest current account deficit, it added.