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Financial News: Bangladesh Growth Led By Garment Exports, Slower Remittanc

Bangladesh Growth Led By Garment Exports, Slower Remittances Pose Risks: Moody's

06/12/2017 - 10:33:00 (RTTNews)

(RTTNews) - Bangladesh's 'Ba3 stable' sovereign credit profile is supported by the robust economic growth that underpinned by garment exports, Moody's Investors Service said in a report on Sunday.

Nonetheless, the weakening inflows of remittances from overseas-based workers could hurt consumption, the report cautioned.

The ready-made garment industry makes up about 70 percent of country's total visible exports and also accounts for significant foreign investment inflows, the report said.

Meanwhile, the farm sector is the biggest employer, with over three million workers.

"Bangladesh will continue to invest in its garment manufacturing sector to capitalize on its strong comparative advantage of abundant low-cost labor," William Foster, a Vice President and Senior Credit Officer at Moody's, said.

"It will remain a leading global supplier of basic garments and the industry will continue to drive the nation's growth, exports and job creation."

Foster also observed that the country's focus on low-value garment exports helps to insulate it from the impact of higher trade tariffs that could result from greater protectionism globally.

The garment industry also benefits from the one of the lowest wage levels in the world.

That said, Bangladesh lags behind its peers such as Vietnam, Cambodia and Sri Lanka, in terms of overall economic competitiveness. This could hamper the ability of the economy to absorb shocks, the report warned.

Overseas remittances accounted for about 6.7 percent of the country's GDP in the fiscal year 2016.

"However, inflows have dropped by 14.6 percent in the first eight months of this fiscal year, driven by muted economic activity in Gulf Cooperation Countries," Moody's said.

"Moving forward, muted remittances growth could weigh on consumption."

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