Executive Summary................................................................................................................................. 5
Core Views......................................................................................................................................................................................5
Major Forecast Changes................................................................................................................................................................5
Key Risk To Outlook......................................................................................................................................................................5
Chapter 1: Political Outlook..................................................................................................................... 7
SWOT Analysis.......................................................................................................................................................... 7
BMI Political Risk Ratings........................................................................................................................................ 7
Domestic Politics...................................................................................................................................................... 8
Pervasive Corruption Tarnishing Country's Prospects...............................................................................................................8
The government's record on corruption has once again been hit and brought into the domestic and international spotlight, following a
highly critical report by Transparency International Bangladesh. The pervasiveness of corruption remains a key sticking point for both
foreign investors and donors. The mere publication of the group's October 2012 report has only served to reinforce their anxieties.
Allegations of high-level corruption have already plagued the World Bank's financing of the Padma Bridge project.
TABLE: POLITICAL OVERVIEW.............................................................................................................................................................................8
Long-Term Political Outlook.................................................................................................................................... 9
Limited Chances Of Major Improvement.....................................................................................................................................9
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 BMI’s 10-year forecast period.
Chapter 2: Economic Outlook................................................................................................................ 13
SWOT Analysis........................................................................................................................................................ 13
BMI Economic Risk Ratings................................................................................................................................... 13
Economic Activity................................................................................................................................................... 14
Ready-made Garment Sector: Opportunities And Challenges.................................................................................................14
There is no question that the ready-made garment sector in Bangladesh remains an important part of its economy. In the near term,
the industry's prospects remain subdued, given its reliance on the sluggish economies of the EU and the US. Over the long term,
however, the sector's outlook remains bright, due to key structural factors such as the improvement of global market access globally and
increasing wages in competitor nations.
TABLE: ECONOMIC ACTIVITY.............................................................................................................................................................................14
Monetary Policy....................................................................................................................................................... 17
Risks To View For Monetary Policy Reversal............................................................................................................................17
We continue to see Bangladesh Bank (BB) reversing its long-held hawkish stance on monetary policy this fiscal year (FY2012/13, with
the ongoing spate of disinflation continuing to bode well for our call of 25 basis points worth of rate cuts. Nevertheless, in this article, we
flesh out the key risks to our view for monetary easing, which include the IMF's policy anchor, lingering anxiety over capital flight and
stubbornness in commodity prices.
TABLE: MONETARY POLICY...............................................................................................................................................................................17
Balance Of Payments.............................................................................................................................................. 19
Acute Risk Of Remittance Crunch, All Eyes On Dhaka.............................................................................................................19
While the recent trend of remittance inflows into Bangladesh has been encouraging, we believe that there is an acute risk of a crisis in
inflows as Dhaka continues to dither on its ongoing labour dispute with the UAE. The Emirates' significance in terms of the recent trends
in Bangladeshi labour movement and overall remittance inflows, coupled with the rising pressure from domestic interest groups and the
immediate impact that the dispute has had on labour migration, should be enough to push Dhaka to constructively respond in the near
future.
TABLE: CURRENT ACCOUNT..............................................................................................................................................................................19
Fiscal Policy............................................................................................................................................................. 21
IMF Conditionality: Policy Hesitation The Name Of The Game.................................................................................................21
A few months into its ECF with the IMF, it appears that relations between the Bangladeshi government and the international lender
are already starting to sour, as the former dithers on key tax and banking sector reforms. With general elections looming, political
motivations are expected to increasingly play a part in the government's unhurried movement with regards to the IMF's conditions.
TABLE: FISCAL POLICY.......................................................................................................................................................................................21
Chapter 3: 10-Year Forecast................................................................................................................... 25
The Bagladesh Economy to 2021........................................................................................................................... 25
Long-Term Potential Strong But Restricted..............................................................................................................................25
We believe that a real GDP growth rate above 6.0% for Bangladesh is sustainable in the long term, given the increasing size of the
workforce. However, to achieve growth in the 7-8% range, productivity will need to improve. Until this happens, GDP per capita – while
on an upward trajectory – will remain relatively low
TABLE: LONG-TERM MACROECONOMIC FORECASTS...................................................................................................................................25
Chapter 4: Business Environment......................................................................................................... 27
SWOT Analysis........................................................................................................................................................ 27
BMI Business Environment Risk Ratings.............................................................................................................. 27
Institutions............................................................................................................................................................... 28
TABLE: BMI BUSINESS AND OPERATION RISK RATINGS..............................................................................................................................28
TABLE: BMI LEGAL FRAMEWORK RATING.......................................................................................................................................................29
Infrastructure........................................................................................................................................................... 30
TABLE: LABOUR FORCE QUALITY.....................................................................................................................................................................30
TABLE: ASIA, ANNUAL FDI INFLOWS................................................................................................................................................................31
Market Orientation................................................................................................................................................... 32
TABLE: LABOUR FORCE QUALITY.....................................................................................................................................................................32
TABLE: ASIA, ANNUAL FDI INFLOWS................................................................................................................................................................33
Operational Risk...................................................................................................................................................... 34
Chapter 5: BMI Global Assumptions..................................................................................................... 35
Global Outlook......................................................................................................................................................... 35
Downward Revisions, But Core Views Remain Unchanged ....................................................................................................35
TABLE: GLOBAL ASSUMPTIONS........................................................................................................................................................................35
TABLE: DEVELOPED STATES REAL GDP GROWTH FORECAST....................................................................................................................36
TABLE: REAL GDP GROWTH CONSENSUS FORECASTS...............................................................................................................................36
TABLE: EMERGING MARKETS REAL GDP GROWTH FORECAST...................................................................................................................37