Bangladesh is among Asia’s poorest countries, with GDP per capita a third of the regional average. It also lags behind on measures of doing business. Creditworthiness is on par with the regional average, while growth has outperformed. The long-term outlook is positive thanks to favourable demographics and competitive low-cost manufacturing.
Growth is projected to accelerate over the coming years, hitting 7% by 2018. Stronger global growth will support the garment industry and remittance inflows. Greater infrastructure investment and higher private capital spending—to complement the low-cost labour—adds further upside to the outlook.
The struggle for power between the Bangladesh Nationalist Party and Awami League has often resulted in internecine warfare. Political violence has simmered down in recent months but religious violence has risen. The Rana Plaza factory collapse in 2013 highlights another set of risks – operational ones. Yet whilst the international community has lobbied for better health and safety regulations, factory owners are unlikely to implement substantial change as this raises operational costs.
Bangladesh’s growth rate has lagged that of India and China, yet poverty rates have fallen dramatically. Free contraception has effectively controlled population growth and improvements in crop yields have lifted the incomes of poorer households. GDP per capita is projected to grow solidly over the next five years spurred by greater urbanisation and the ongoing shift into low-cost manufacturing. But this will not be enough to lift Bangladesh out of lower-middle income status.
Bangladesh has an OECD country credit grade of 5 and speculative-grade sovereign debt ratings from all three major ratings agencies. These ratings underline Bangladesh’s vulnerability to business, financial and economic setbacks.
Bangladesh ranks poorly (174 out of 189 economies) on the World Bank’s ease of doing business gauge — which measures regulation and red tape relevant to a domestic small to mid-sized firm. Enforcing contracts, registering property and getting electricity are very difficult, however it scores better on measures of protecting investors and ease of starting a business.
Bangladesh also scores poorly on the World Bank’s governance gauges, severely so for political stability and corruption.
Bangladesh was Australia’s 34th largest trading partner in 2014-2015. Merchandise export receipts from Bangladesh totalled A$708m in 2014-2015, up 53% from a year earlier. This was driven largely by vegetable, fertilisers and cotton exports. Imports rose 31% to A$674m, most of which were textiles.
Australia’s service exports and bilateral investment with Bangladesh are miniscule. Though Bangladesh is the world’s eighth largest remittance recipient, with inflows equivalent to 8% of GDP, remittance flows from Australia remain small, but have risen almost 10 fold since 2010.
Department of Foreign Affairs