Home Apparel Strong RMG supports Bangladesh’s sovereign credit profile

Strong RMG supports Bangladesh’s sovereign credit profile

Bangladesh’s Ba3 stable sovereign credit profile is supported by the robust growth of an economy that is bolstered by garment manufacturing industry exports, says Moody’s Investors Service in a report.However, weakening inflows of remittances from overseas-based workers could hurt consumption, it says, reports BSS.The ready-made garment industry makes up about 70 percent of Bangladesh’s total merchandise exports, as measured in local currency terms, and also accounts for significant foreign investment inflows, according to the New York based Moody’s Investors Service report released Sunday.While the agricultural sector is still the biggest employer in Bangladesh, the garment industry employs over three million workers and offers continued opportunity for labor productivity gains that will support future economic development and growth, it adds.”Bangladesh will continue to invest in its garment manufacturing sector to capitalize on its strong comparative advantage of abundant low-cost labor,” said William Foster, a Vice President and Senior Credit Officer at Moody’s.”It will remain a leading global supplier of basic garments and the industry will continue to drive the nation’s growth, exports and job creation,” said William Foster.The country’s focus on low-value garment exports helps to insulate it from the impact of higher trade tariffs that could result from greater protectionism globally.  Nonetheless, while Bangladesh’s garment industry benefits from some of the lowest wage levels in the world, the country’s overall economic competitiveness lags that of its peers such as Vietnam (B1 positive), Cambodia (B2 stable) and Sri Lanka (B1 negative). When factoring in the quality of its physical infrastructure, skill levels and transparency of the business environment, the country’s low competitiveness hampers the ability of its economy to absorb shocks, says the report.In addition to the garment sector, remittances from overseas workers contribute to Bangladesh’s economic growth by supporting household income and consumption.Remittances accounted for about 6.7 percent of the country’s GDP in the fiscal year 2016.However, inflows have dropped by 14.6 percent in the first eight months of this fiscal year, driven by muted economic activity in Gulf Cooperation Countries. Moving forward, muted remittances growth could weigh on consumption.

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