S&P cuts Bangladesh outlook to 'negative', flags banking woes and energy risks

S&P Global cut its long-term rating outlook on Bangladesh to ‘negative’ from ‘stable’, citing risks from a weak domestic banking sector, elevated energy costs driven by the Middle East war, and an uncertain readymade garment exports market.

The move underscores the fragility of Bangladesh’s economic recovery, as the world’s second-largest garment exporter grapples with domestic and global headwinds that threaten to erode the FX reserves and export receipts that underpin its credit profile.

“Our ratings on Bangladesh reflect the economy’s modest per capita income and limited fiscal flexibility owing to a combination of low revenue-generation capacity and the government’s elevated interest burden,” S&P said on Monday.

Bangladesh students demand minister quit over flood-hit exams

The ratings agency, meanwhile, affirmed its ‘B+/B’ long- and short-term sovereign credit ratings on the South Asian nation, but warned that economic growth could average only around 4.5% over the next three years.