Country Forecast Bangladesh July 2018 Updater

Country Forecast Bangladesh July 2018 Updater

  • July 2018 •
  • Report ID: 1697715 •
  • Format: PDF


  • The Economist Intelligence Unit expects the Awami League to secure re-election in the legislative polls scheduled for late 2018. Despite the ongoing court case against the de facto leader of the Bangladesh Nationalist Party, Khaleda Zia, for graft, we expect the party to participate in the poll (it boycotted the 2014 election) in order to prevent its further marginalisation from politics.
  • The threat of terrorist attacks remains high. Political stability will also be marred by opposition-backed protests against Mrs Zia's corruption case. Although we expect the security forces to maintain law and order, such episodes will negatively affect foreign investment into the country.
  • Foreign policy will focus on ties with key regional players. Political and economic ties with India and, to a lesser extent, Japan will continue to deepen over the forecast period. Relations with China will also be strong, with a particular focus on economic, investment and trade ties.
  • Policymakers will accord a high priority to improving electricity supplies. Private electricity producers will achieve some success in this area, but power rationing will continue in 2018-22 as rising industrial and consumer demand outstrips increasing capacity.
  • The government will run budget deficits throughout the forecast period. It may increase taxes after the elections as part of its efforts to increase revenue. Notably, a new value-added tax law is due to come into effect in fiscal year 2019/20 (July-June). The government may also consider introducing a carbon tax, which will raise business costs.
  • Real GDP growth will average 7.3% a year in fiscal years 2018/19-2021/22, bolstered by sustained gains in private consumption and investment. Private consumption will be supported by rising personal incomes (from a still-low base). Government spending will also increase ahead of the 2018 elections.
  • We forecast that the trade deficit will narrow to US$12.4bn in 2022, from US$15bn in 2018. This modest narrowing, amid an expected pick-up in export earnings, reflects Bangladesh's heavy reliance on imports of fuel, inputs for the export-oriented garment sector and capital goods for infrastructure development.
  • Remittance growth will bounce back in 2018 and continue to grow at a modest rate thereafter, offsetting a large part of the shortfall on the trade account. Despite this, the current account is expected to record a deficit equivalent to 1.9% of GDP on average in 2018-22.


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