Bangladesh outlook upgraded to stable
Bangladesh continues to face significant risks from structural weaknesses in its economy, particularly in the banking sector and exposure to volatile global energy and trade conditions.
Against this backdrop, Moody’s Ratings has revised its outlook on the country to stable from negative, while maintaining its long-term sovereign rating at B2.
The global ratings agency said the change reflected
a more balanced assessment of the risks that had previously prompted the negative outlook.
“The change in outlook to stable from negative reflects our assessment that the acute political and external pressures that drove the negative outlook have eased, leaving risks more balanced at the B2 rating level, even as material structural vulnerabilities persist,” Moody’s said.
According to the agency, the post-election political transition and the new government’s strong mandate have reduced the risk that political uncertainty could disrupt the reform process.
Bangladesh’s external position has also strengthened, Moody’s said, citing the rebuilding of foreign exchange reserves, a more flexible exchange-rate regime and record remittance inflows.
These developments have helped cushion the impact of higher energy import costs.
The agency nevertheless stressed that the improvement does not remove the country’s underlying vulnerabilities.
“Continued engagement with the IMF and other international financial institutions remains an important anchor for external financing and reform, despite friction over the pace of reforms and ongoing discussions over the terms of a successor IMF programme,” Moody’s said.
The assessment comes as other major ratings agencies have taken a more cautious view of Bangladesh’s economic prospects.
In June, S&P Global revised Bangladesh’s long-term outlook to negative from stable, citing continued weakness in the banking sector.
It also pointed to additional risks from volatile global energy markets and changing trade conditions.
A month earlier, in May, Fitch Ratings also changed its outlook on Bangladesh’s long-term rating to negative from stable.
Fitch cited macroeconomic vulnerabilities arising from the country’s significant exposure to the conflict in the Middle East.
Moody’s latest decision therefore provides some relief amid a broader assessment of risks facing the economy. Its stable outlook reflects an easing of immediate political and external pressures, while the unchanged B2 rating indicates that substantial structural challenges remain.
The contrasting assessments from the three agencies underline the mixed picture facing Bangladesh: improvements in reserves, remittances and exchange-rate flexibility have strengthened the external position, while weaknesses in the banking sector and exposure to global energy and trade shocks continue to pose significant risks.
