Polarised political landscape may constrain effectiveness of institutions, limit checks and balances on govt: S&P

Bangladesh's "highly concentrated political landscape" may constrain the effectiveness of institutions and limit checks and balances on the government, the S&P Global Ratings said on Tuesday (25 July).

Lowering Bangladesh's long-term rating outlook to negative from stable, the agency said political conditions could undermine the predictability of future policy responses.

In its country outlook, the S&P said, "The confrontational stance between the ruling Awami League and opposition Bangladesh Nationalist Party [BNP] reflects the deep division between the historically prominent political parties."

It pointed out that Bangladesh's foreign direct investment has remained persistently low, given the country's evolving institutional settings, infrastructural deficiencies, high levels of perceived corruption, and uneven business environment.

"The political landscape in Bangladesh remains polarised, with considerable power centred with the ruling Awami League. The opposition's representation in the Parliament remains extremely small, limiting checks and balances on the government." 

While the country would hold elections in January 2024, it was unclear whether the BNP would participate, the S&P also said.

The agency further said Bangladesh's economy is likely to expand at 6.0%-6.4% over the next three years, reflecting a slight moderation compared with the growth trend of its long-term average real GDP.

"The downshift in headline growth reflects necessary rebalancing following a period of overheating. 

"Faster economic growth in fiscals 2021 and 2022 (ended 30 June) was accompanied by a weakening of Bangladesh's external position, and we anticipate relatively slower domestic demand conditions as part of the economy's stabilisation."