Executive Summary.. 5
Core Views...5
Major Forecast Changes.....5
Key Risks To Outlook.....5
Chapter 1: Political Outlook. 7
SWOT Analysis....7
BMI Political Risk Ratings..7
Domestic Politics .. 8
IMF Assistance Increasingly Likely...8
It looks increasingly likely that the IMF will provide Bangladesh financial assistance through its Extended Credit Facility, as the
organisations stance towards the US $1bn loan appears to be softening. While the fact that the cumulative current account balance
for FY 2011/12 (July-June) remains in surplus suggests IMF assistance may not be necessary, we highlight that weakening reserves
indicate otherwise. That being said, we caution that the governments centre-left political measures could derail the loan process.
TABLE: Political Overview.. 8
Long-Term Political Outlook... 10
Limited Chances Of Major Improvement....10
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 of a substantial improvement over the next 10 years.
Chapter 2: Economic Outlook.... 13
SWOT Analysis..13
BMI Economic Risk Ratings.....13
Economic Activity ... 14
Consumer-Led Slowdown....14
Our below-consensus outlook for real GDP growth to moderate in Bangladesh appears to be well placed. We believe that the countrys
economy, driven by consumer goods and services, will see a marked slowdown as the Bangladeshi consumer faces several headwinds.
At the moment, we are pencilling in real GDP growth to fall to 5.9% in FY 2011/12 (July-June) from 6.7% in the previous fiscal year.
TABLE: ECONOMIC ACTIVITY.. 14
Monetary Policy ... 16
Bangladesh Bank To Pause Despite Stubborn Inflation...16
Even though consumer price inflation has been more sticky than expected, we continue to hold to our outlook that Bangladesh Bank
will pause on further rate hikes. Precipitously slowing money supply growth suggests disinflation is imminent and that (despite the
stubbornness of inflation) the central banks overall monetary programme for FY 2011/12 is largely on track. That said, we note that risks
to our view are heavily weighted to the upside.
TABLE: MONETARY POLICY.... 17
Fiscal Policy .... 18
Fading Foreign Funds A Continuing Challenge.18
Even though official statistics paint a relatively positive picture of the governments fiscal performance so far in FY 2011/12, the rapid
decline of net foreign aid should increasingly cause more difficulties. Unfortunately for Bangladesh, its major bilateral donors are facing
fiscal pressures of their own. Furthermore, domestic shortcomings, in terms of project implementation concerns, should continue to be a
barrier for any resurgence in foreign assistance.
TABLE: FISCAL POLICY.... 19
Balance Of Payments ..... 20
Current Account Returning To Deficit After Seven Years.20
Bangladeshs current account balance looks set to return to deficit territory in FY 2011/12 after seven years in surplus. Our expectation
for a weakening of export growth, coupled with insufficient remittance inflows, has led us to downgrade our current account projections.
For FY 2011/12 (July-June), we are pencilling in a nominal current account deficit of US $1.3bn (or 1.1% of GDP), down from a US $1.0bn
(0.9% of GDP) surplus in FY 2010/11.
TABLE: CURRENT ACCOUNT ... 21
Chapter 3: 10-Year Forecast.. 23
The Bangladeshi Economy To 2021... 23
Long-Term Potential Strong But Restricted ..23
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 and higher, 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.... 23
Chapter 4: Business Environment. 25
SWOT Analysis..25
BMI Business Environment Risk Ratings...25
Business Environment Outlook.. 26
Institutions ... 26
TABLE: BMI Business And Operation Risk Ratings... 26
TABLE: BMI Legal Framework Rating... 27
Infrastructure ... 28
TABLE: Labour Force Quality..... 29
Market Orientation ... 30
TABLE: Asia, Annual FDI Inflows..... 30
TABLE: Trade And Investment Ratings..... 31
TABLE: TOP EXPORT DESTINATIONS .... 31
Operational Risk .. 32
Chapter 5: BMI Global Assumptions. 33
Global Outlook.. 33
Eurozone Break-Up Risks Rising ...33
TABLE: GLOBAL ASSUMPTIONS ..... 33
TABLE: DEVELOPE D STATES REAL GDP GROWTH FORECAST .... 34
TABLE: REAL GDP GROWTH CONSENSUS FORECASTS .... 34
TABLE: EMERGING MARKETS REAL GDP GROWTH FORECAST ... 35