Boston, MA -- (SBWire) -- 07/30/2013 --The devastating collapse of a factory in Savar has been nothing short of a human tragedy. While it would be rash to make generalisations about the critical readymade garment industry from this incident and to suggest that a widespread international pullout is on the cards, we believe that stricter standards and regulations are likely to follow.
Public unrest owing to heightened tensions between the ruling Bangladesh Awami League (AL) and its main opposition, the Bangladesh Nationalist Party (BNP), are unlikely to subside as both sides continue to confront each other regarding the restoration of the caretaker government system. In addition, unrest stemming from the ongoing war crimes trials is unlikely to dissipate in the near term.
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On a related note, the handing out of the tribunal's first verdict in January should boost the government's political standing as it inches closer towards fulfilling an electoral pledge. Having said that, the ongoing trials could be a catalyst for Islamist militancy in the country.
In line with projections, real GDP growth slowed for the second straight year to 6.0% in FY2012/13 (July-June). Looking ahead, we continue to expect a growth bounce in FY2013/14 to 6.5%, on the back of tailwinds such as accommodative monetary policy and improving external demand.
After two-and-a-half years of holding a hawkish stance towards monetary policy, Bangladesh Bank (BB) has finally decided to reverse its posture, cutting its policy rates by 50 basis points (bps) in January. Considering the central bank's ambitious targets for credit growth, we expect an additional 50bps worth of further easing.
Bangladesh Bank (BB) has allowed the taka to strengthen in line with the strong and supportive fundamental pressures on the currency - rising export growth, still-contracting imports, and robust remittance inflows. With the underlying fundamental picture unlikely to change considerably, we continue to see a broad continuation of the recent taka strength. Further taka strength should help the economy's floundering import sector.
The government has announced a new schedule for the implementation of the long-delayed Padma bridge. We believe that putting the bulk of the emphasis on internal financing could be a drag on the government's ability to finance other infrastructure projects over the coming years.
Major Forecast Changes
In 2012, the government decided to revise the base year for calculation of the consumer price inflation (CPI) to 2005-06, and change the weights of the basket. For our purposes, we are sticking to the 1995-96 CPI index until we obtain more readings of inflation based on the new weights.
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Recently Released Market Study: Bangladesh Business Forecast Report Q3 2013
New Country Reports market report from Business Monitor International: "Bangladesh Business Forecast Report Q3 2013"