Bangladesh outlook stable despite choppy remittance, exports: Fitch
Skip to main content
  • Home
  • Economy
    • Aviation
    • Bazaar
    • Budget
    • Industry
    • NBR
    • RMG
    • Corporates
  • Stocks
  • Analysis
  • World+Biz
  • Sports
  • Features
    • Book Review
    • Brands
    • Earth
    • Explorer
    • Fact Check
    • Family
    • Food
    • Game Reviews
    • Good Practices
    • Habitat
    • Humour
    • In Focus
    • Luxury
    • Mode
    • Panorama
    • Pursuit
    • Wealth
    • Wellbeing
    • Wheels
  • Epaper
  • More
    • Subscribe
    • Videos
    • Thoughts
    • Splash
    • Bangladesh
    • Supplement
    • Infograph
    • Archive
    • COVID-19
    • Games
    • Long Read
    • Interviews
    • Offbeat
    • Podcast
    • Quiz
    • Tech
    • Trial By Trivia
    • Magazine
  • বাংলা
The Business Standard

Tuesday
January 31, 2023

Sign In
Subscribe
  • Home
  • Economy
    • Aviation
    • Bazaar
    • Budget
    • Industry
    • NBR
    • RMG
    • Corporates
  • Stocks
  • Analysis
  • World+Biz
  • Sports
  • Features
    • Book Review
    • Brands
    • Earth
    • Explorer
    • Fact Check
    • Family
    • Food
    • Game Reviews
    • Good Practices
    • Habitat
    • Humour
    • In Focus
    • Luxury
    • Mode
    • Panorama
    • Pursuit
    • Wealth
    • Wellbeing
    • Wheels
  • Epaper
  • More
    • Subscribe
    • Videos
    • Thoughts
    • Splash
    • Bangladesh
    • Supplement
    • Infograph
    • Archive
    • COVID-19
    • Games
    • Long Read
    • Interviews
    • Offbeat
    • Podcast
    • Quiz
    • Tech
    • Trial By Trivia
    • Magazine
  • বাংলা
TUESDAY, JANUARY 31, 2023
Bangladesh outlook stable despite choppy remittance, exports: Fitch

Economy

TBS Report
11 November, 2020, 09:25 pm
Last modified: 12 November, 2020, 01:24 am

Related News

  • IFIC celebrating 'Remittance Utshab' nationwide
  • ICCB warns of recessionary risks, urges careful fiscal, monetary steps
  • BRAC Bank hosts 'Remittance-Customer Meet' in Siraganj
  • EBL signs remittance service agreement with NEC Money Transfer
  • Remittance rises in December, record 11.25 lakh foreign jobs in 2022

Bangladesh outlook stable despite choppy remittance, exports: Fitch

Only the strong Forex reserve - which crossed $40 billion - helped Bangladesh retain stable outlook rating

TBS Report
11 November, 2020, 09:25 pm
Last modified: 12 November, 2020, 01:24 am

Global credit rating agency Fitch has rated Bangladesh with a "stable outlook" for 2020 but warned about a downside risk of the country's rising remittances – terming the growth "temporary" – and an uncertainty over exports.

In its ratings released on Wednesday, Fitch addressed various economic challenges for Bangladesh, including higher degree of uncertainty in achieving expected GDP growth, a rise in budget deficit amid a poor revenue collection, and a further rise in default loans.

Despite various challenges arising out of the Covid-19 pandemic, only the strong position of foreign exchange reserves – which crossed $40 billion – has helped Bangladesh retain its stable outlook rating.

Addressing the remittance issue, Fitch said remittance is an important driver of household consumption and accounts for about 6% of the GDP. It has surprisingly been resilient, supporting private consumption.

Remittances grew by nearly 17% year-on-year during the January-October period in 2020.

"We think this rise is temporary. Factors such as workers repatriating their savings before returning home and also a shift towards more formal remittance channels, supported by the Bangladesh Bank's 2% cash incentive, contributed partly to the rise in remittances," the global credit rating agency said.

Expressing concerns about exports, Fitch said the outlook for exports remains uncertain, due partly to the pandemic, but there is also little evidence to suggest that Bangladesh might be benefitting significantly from trade diversion owing to the US-China trade disputes.

Bangladesh's readymade garment sector, which accounts for 80% of total export earnings, raked in $27.9 billion in FY20, down from $34.1 billion in FY19, as demand from key markets, such as the European Union (62%) and the United States (18%), has fallen.

According to official statistics, the economy slowed significantly to 5.2% in FY20 from 8.2% in FY19.

"We expect growth to recover to 5.6% in FY21 and 7% in FY22. However, our growth forecasts are subject to a high degree of uncertainty, and downside risks would be linked to the evolution of the pandemic within Bangladesh and key export markets."

Fitch also projected the budget deficit to remain at 7.8% of GDP in FY21, higher than the authorities' projection of 6%, driven by continued spending on economic recovery as part of the stimulus package – around 4% of GDP over FY20 and FY21 – and weak revenue performance.

Fiscal risks from contingent liabilities have increased due to the economic fallout on state-owned enterprises and a weak banking sector.

The authorities' FY20 revised budget deficit now stands at 5.3% of GDP, up from 4.8%.

Fitch sees a high risk of rising default loans further, which the government brought down to single digit in December last year by relaxing loan rescheduling policy.

Citing the International Monetary Fund's (IMF) observation, Fitch said, "The published non-performing loan (NPL) ratios grossly underestimate the NPL problem in the banking sector, and we expect NPL ratios to rise further."

The overall capital adequacy ratio of the banking sector is also low, at 11.6%.

Bangladesh's banking sector health and governance standards remain weak, particularly in public-sector banks.

The gross NPL ratio remained high at around 9% in June 2020 against 11.2% a year ago. The NPL ratio of the state-owned banks is significantly higher at 20%.

State-owned banks account for around 30% of the total banking sector's assets, thus creating the risk of contingent liabilities for the sovereign, according to Fitch.

Strength of Bangladesh

Bangladesh has strengthened its external buffers despite the Covid-19 shock. According to the latest data, international reserves increased to about $40 billion from about $33 billion at end-2019, reflecting lower imports, higher remittances, and increased borrowing from multilaterals.

"We estimate foreign exchange reserve coverage of current external payments to remain healthy at 8.6 months by end-2020," Fitch says.

"We believe that the Bangladesh Bank will maintain its policy stance for a stable and competitive exchange rate through foreign exchange intervention. Forex reserves in Bangladesh are high at present, although these could come under pressure if the authorities were to intervene aggressively to support the exchange rate in the event of an external or confidence shock."

Bangladesh will continue to run modest current account deficits from 2021, as imports of capital goods associated with large infrastructure projects rise.

However, external financing requirements in the near-term are manageable. Fitch forecasts the external debt service to be manageable in 2021 and 2022 at around 4% of current external receipts.

The IMF has approved $244 million under the Rapid Credit Facility and $488 million under the Rapid Financing Instrument.

Bangladesh has also received support from the World Bank and the Asian Development Bank to fund Covid-19-related expenditure.

Top News

remittance / Fitch

Comments

While most comments will be posted if they are on-topic and not abusive, moderation decisions are subjective. Published comments are readers’ own views and The Business Standard does not endorse any of the readers’ comments.

Top Stories

  • The International Monetary Fund (IMF) logo is seen outside the headquarters building in Washington, U.S., September 4, 2018. REUTERS/Yuri Gripas/File Photo
    IMF approves Bangladesh's $4.5 billion loan proposal
  • Despite downturn 3 dozen listed firms plan Tk7,500cr investment
    Despite downturn 3 dozen listed firms plan Tk7,500cr investment
  • Mysterious resignation of SIBL chairman, addl MD
    Mysterious resignation of SIBL chairman, addl MD

MOST VIEWED

  • Top 20 defaulters owe Tk16,588 crore to lenders: Finance minister
    Top 20 defaulters owe Tk16,588 crore to lenders: Finance minister
  • TBS file photo
    Z&Z Fabrics introduces Sorona fabric line
  • Cry for dollar for Ramadan imports
    Cry for dollar for Ramadan imports
  • Manufacturers feel the pinch as consumers tighten belt
    Manufacturers feel the pinch as consumers tighten belt
  • Illustration: TBS
    Biz leaders want crisis management, energy security for survival
  • Infograph: TBS
    State banks spend 80% of their forex for govt imports in H1

Related News

  • IFIC celebrating 'Remittance Utshab' nationwide
  • ICCB warns of recessionary risks, urges careful fiscal, monetary steps
  • BRAC Bank hosts 'Remittance-Customer Meet' in Siraganj
  • EBL signs remittance service agreement with NEC Money Transfer
  • Remittance rises in December, record 11.25 lakh foreign jobs in 2022

Features

Photo: Courtesy

The Hawkers: Where minimalism meets motifs

18h | Brands
TBS illustration

Where do Shariah-compliant mutual funds stand in Bangladesh

17h | Panorama
Sketch: TBS

A subsidy war without winners

17h | Panorama
Photo: Collected

Oppo Reno 8T first look revealed!

18h | Brands

More Videos from TBS

two more factories of the country got platinum certificate.

two more factories of the country got platinum certificate.

8h | TBS Today
Iconic villains of Bollywood

Iconic villains of Bollywood

9h | TBS Entertainment
General knowledge "Gravity"

General knowledge "Gravity"

7h | Videos
Will tanks turn the tide for Ukraine?

Will tanks turn the tide for Ukraine?

8h | TBS World

Most Read

1
Picture: Collected
Bangladesh

US Embassy condemns recent incidents of visa fraud

2
Illustration: TBS
Banking

16 banks at risk of capital shortfall if top 3 borrowers default

3
Bapex calls candidates for job test 9 years after advert!
Bangladesh

Bapex calls candidates for job test 9 years after advert!

4
Photo: Collected
Splash

Hansal Mehta responds as Twitter user calls him 'shameless' for making Faraaz

5
A frozen Beyond Burger plant-based patty. Photographer: AKIRA for Bloomberg Businessweek
Bloomberg Special

Fake meat was supposed to save the world. It became just another fad

6
Representational Image
Banking

Cash-strapped Islami, Al-Arafah and National turn to Sonali Bank for costly fund

EMAIL US
[email protected]
FOLLOW US
WHATSAPP
+880 1847416158
The Business Standard
  • About Us
  • Contact us
  • Sitemap
  • Privacy Policy
  • Comment Policy
Copyright © 2023
The Business Standard All rights reserved
Technical Partner: RSI Lab

Contact Us

The Business Standard

Main Office -4/A, Eskaton Garden, Dhaka- 1000

Phone: +8801847 416158 - 59

Send Opinion articles to - [email protected]

For advertisement- [email protected]