2014-01-05 02:07:24 - Recently published research from Business Monitor International, "Bangladesh Business Forecast Report Q1 2014", is now available at Fast Market Research
Bangladesh's political crisis shows no signs of abating as the country heads towards a general election. A series of opposition-led strikes culminated in the recent arrest of key opposition leaders, making a near-term truce between the ruling Awami League (AL) and the opposition Bangladesh Nationalist Party (BNP) increasingly difficult. Bangladesh's economic resilience looks set to come under pressure as date for the remaining months of the calendar year are released, as protest activity is likely to have hurt economic activity across the board. From a more structural perspective, though, improvements made in the local business environment, particular regarding opening a business, should help to foster growth over the coming years.
Despite the potential for near-term price shocks related to strike activity,
weak economic growth and declining money supply trends suggest that inflation will remain subdued over the coming months. Over the longer term, there is a close link between government spending as a share of GDP and CPI, with rising fiscal spending relative to GDP going hand in hand with higher inflation. This underscores the importance that fiscal developments have on fostering price stability, and we believe as government spending as a share of GDP remains elevated over the coming years, CPI will remain above historical averages.
Full Report Details at
- www.fastmr.com/prod/759022_bangladesh_business_forecast_report_q ..
The Bangladeshi taka should remain fairly stable over the coming months as Bangladesh Bank (BB) keeps the unit anchored at the current level of BDT77.65/US$ while it builds up foreign reserves. We expect a 1.6% current account surplus this year, which should help import cover rise back above five months over the medium term, allowing BB significant control over the taka.
Major Forecast Changes
As a result of the heightened political tensions, we have downgraded the country's short-term political risk rating from 68.3 out of 100 to 65.8 out of 100, leaving it below the regional average of 70.0.
Key Risks To Outlook
Downside Risks To Growth: Bangladesh's increasingly murky political environment puts the expected recovery in FY2013/14 at risk. Growing uncertainty over the looming elections (scheduled to take place within the next few quarters) could keep fresh investment activity on the sidelines for the time being. Should Europe's ongoing recovery quickly lose steam, the country's export sector could once again find itself facing a slowdown in growth.
Downside Risks To Taka Stability And Current Account Surplus:
The collapse in the number of Bangladeshis leaving for overseas employment poses a risk to continued taka stability and to the country's current account surplus, given their importance with regards to future remittance inflows. While migration flows appear to have stabilised in recent months, the lower levels of late pose the biggest risk to the country's external accounts.
Partial Table of Contents:
Major Forecast changes
Key risks to outlook
chapter 1: political outlook
BMi political risk ratings
Unrest Intensifies, No End In Sight As Elections Approach
- Bangladesh's political crisis shows no signs of abating as the country heads towards a general election. A series of opposition-led strikes culminated in the recent arrest of key opposition leaders, making a near-term truce between the ruling Awami League and the opposition Bangladesh Nationalist Party increasingly difficult. As a result, we have downgraded the country's short-term political risk rating from 68.3 out of 100 to 65.8 out of 100, leaving it below the regional average of 70.0.
taBLe: poLitica L oVerVie W
Long- term political outlook
Limited chances of Major improvement
- Although Bangladesh returned to full civilian rule following elections in December 2008, the political system remains immature and prone to instability. We see only limited prospects for a substantial improvement over the next 10 years.
chapter 2: economic outlook
BMi economic risk ratings
improvements Made But risks still abound
- Bangladesh's economic resilience looks set to come under pressure as date for the remaining months of the calendar year are released, as protest activity is likely to have hurt economic activity across the board. From a more structural perspective, though, improvements made in the local business environment, particular regarding opening a business, should help to foster growth over the coming years.
taBLe: econoMic actiVit Y
rising tax take a Double-edged sword
- The Bangladeshi government is set to revise its FY2013/14 (July-June) budget in light of the spike in strike activity. It is likely that both revenue and expenditure targets will be lowered more in line with our forecasts (for a 19.4% increase in revenue and grants and an 11.0% increase in expenditure). While the fiscal deficit will remain manageable at around 3.0% of GDP on average over the coming years, it is the growing rate of non-development expenditure, or more specifically the crowding out impact it will have on the private sector, that poses the largest risk to real GDP growth over the coming years.
taBLe: Fisca L poLicY
Full Table of Contents is available at:
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