Fast Market Research recommends "Bangladesh Business Forecast Report Q4 2013" from Business Monitor International, now available
Boston, MA -- (SBWIRE) -- 10/28/2013 -- In a widely anticipated move following the Savar building collapse in April, the government passed amendments to the labour law in July, which are likely to hit Bangladesh's business environment. In the grand scheme of things, we believe that global retailers will be hard-pressed to find other sourcing alternatives in the region.
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 completely dissipate in the near term. The ongoing trials could be a catalyst for Islamist militancy in the country.
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The Bangladeshi economy has demonstrated resilience in the face of multiple headwinds (such as political unrest at home), which bodes well for our view that real GDP growth will bounce in FY2013/14 (July-June) to 6.5%. Key tailwinds - loose monetary policy and improving external demand - are expected to remain in play.
While we continue to believe that the country's fundamentals remain favourable for further taka strength, we have decided to temper our stance on the unit as there is now more pressure than ever on the central bank to keep the unit competitive amidst the ongoing currency sell-off taking place across the region.
The AL-led government's final budget should help the economy rebound this fiscal year. While the looming elections pose a downside risk to fiscal stability, we continue to expect the government to keep within its stated budget targets as it has done so in its present tenure.
Based on our reading of the central bank's biannual monetary policy for the first half of FY2013/14, we believe that the monetary authority is likely to maintain a dovish bias towards policy, and we continue to see 50 basis points worth of further easing.
Major Forecast Changes
We have marginally downgraded our taka expectations and now see the unit ending 2013 and 2014 at BDT77.75/US$, down from BDT75.00/US$ previously, implying little to no change from the current spot rate.
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.
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