GDP growth seen at 7.1pc this fiscal year

Bangladesh's economic growth will remain strong at 7.1 percent in the ongoing fiscal year based on rising foreign direct investment in energy and transport infrastructure projects, the BMI Research said in a report.

The forecast from the London-based firm is unchanged from the previous year. 

“We believe that the country will be able to sustain average growth above 7 percent in the coming years riding on competitive labour costs, large export-oriented garment sector, and improved access to energy supplies,” it said.

Owned by Fitch Group, the BMI Research provides macroeconomic, industry and financial market insights.

Bangladesh's longer term growth performance will likely remain below potential over the coming years, according to the report.

It said both political tensions and a challenging business environment weigh on the country's long-term growth prospects.

“Bangladesh's political climate remains fraught with uncertainty, and the risks of public violence remain elevated.” “Threats from Islamist radicals have not abated in the country, while the Awami League government crackdown on the opposition could provoke further dissent,” it said.

Other factors which contribute to the country's relatively high operational risks include poor logistics and cumbersome procedures to obtain construction permits, register property and file tax returns, said BMI Research.

“These challenges in Bangladesh's operating environment could undermine business confidence, and slow down the pace of investment spending over the coming quarters.”

“In the longer term, the country's ability to achieve sustainable growth will likely be undermined if these risks remain in place,” BMI Research said. The analysis said investment in infrastructure will continue to serve as a key growth driver for Bangladesh in fiscal 2016-17.

“While China remains a major source of foreign direct investment, we believe that Bangladesh will also succeed in attracting investment from other regional players, including Japan and India, based on its favourable growth prospects and strategic geographical location.”