International rating agency Standard & Poor’s on Wednesday warned that political uncertainties would remain high in Bangladesh for some time hurting investor confidence and weakening economic activity. It said that the new government of Bangladesh would face questions about its legitimacy as the main opposition parties boycotted the national elections on January 5.It, however, said that S&P’s sovereign credit rating of BB- would remain unchanged for the next two years as the agency expected that the tensions would not boil over into prolonged and widespread violence.
In a report titled ‘Election Woes In Bangladesh And Thailand Raise Risk But Don’t Yet Undermine Sovereign Ratings’, the S&P said the main opposition parties in both Bangladesh and Thailand boycotted the respective elections early in 2014, thereby weakening their legitimacy and undermining the strength of the democratic process.
‘The roots of the disagreements between political groups in the two countries run deep, their resolutions are
unlikely to be straightforward,’ said S&P’s credit analyst Kim Eng Tan.
‘Any prolonged and widespread violence could exacerbate political instability and deal sustained damage to these economies, which have been resilient to past political turmoil,’ he said.
He said that Bangladesh and Thailand possessed strong external balances, relatively low debt and interest burdens, and low inflation. ‘These attributes have helped to stabilise sovereign rating fundamentals amid occasional political volatilities,’ he said.
He said although sovereign ratings of the countries might not be changed in the next 24 months, political instability had somewhat weakened the credit profile for Thailand and Bangladesh.
-With New Age input
