Seb Country Analysis 2008 Bangladesh

Bangladesh SEB MERCHANT BANKING – COUNTRY RISK ANALYSIS

December 2, 2008

Analysts: Jenny Nordgren. Tel: +46 8 763 96 05. E-mail: [email protected] Economic activity remains strong despite several natural disasters and surging global commodity prices. However, the inflation rate is high and the macroeconomic balance is slightly deteriorating. The upcoming elections risk triggering political turmoil.

Country Risk Analysis = píêçåÖ=ÖêçïíÜ=ÇÉëéáíÉ=å~íìê~ä=Çáë~ëíÉêëK=aÉëéáíÉ=ëÉîÉê~ä=å~íìê~ä=Çáë~ëíÉêëI=ÉÅçåçãáÅ= ÖêçïíÜ=êÉã~áåÉÇ=ëíêçåÖ=áå=ÑáëÅ~ä=óÉ~ê=EcvF=OMMU=EÉåÇáåÖ=gìåÉF=~í=~ÄçîÉ=S=B= ëìééçêíÉÇ=Äó=~=ÄìãéÉê=Ü~êîÉëí=áå= ^éêáäI=~=éáÅâ=ìé=áå=Ö~êãÉåí=Éñéçêíë=ETR= 7.0% 12.0% 6.0% B=çÑ=íçí~ä=ÉñéçêíëF=~åÇ=îÉêó=ëíêçåÖ= 10.0% 5.0% ÖêçïíÜ=áå=êÉãáíí~åÅÉëK=kÉîÉêíÜÉäÉëëI= 8.0% 4.0% éçîÉêíó=áë=ëíáää=ïáÇÉëéêÉ~Ç=EéÉê=Å~éáí~= 6.0% 3.0% 4.0% áåÅçãÉ=áë=çåäó=~Äçìí=rpa=RMMF=~åÇ=íÜÉ= 2.0% 2.0% Åçìåíêó=áë=îìäåÉê~ÄäÉ=íç=å~íìê~ä= 1.0% 0.0% Çáë~ëíÉêë=~åÇ=Åäáã~íÉ=ÅÜ~åÖÉK=^äëçI=íÜÉ= 0.0% 2003 2004 2005 2006 2007 2008 çåÖçáåÖ=ëäçïÇçïå=áå=íÜÉ=ÖäçÄ~ä= GDP (lhs) Inflation (rhs) ÉÅçåçãó=Ç~ãéë=ÉÅçåçãáÅ=åÉ~êJíÉêã= éêçëéÉÅíë=áå=íÉêãë=çÑ=äçïÉê=Éñéçêí= ÇÉã~åÇ=~åÇ=~=éçíÉåíá~ä=êÉÇìÅíáçå=çÑ=ïçêâÉêëÛ=êÉãáíí~åÅÉëK= = fåÑä~íáçå=êÉã~áåë=ÜáÖÜK=fåÑä~íáçå=áåÅêÉ~ëÉÇ=ã~êâÉÇäó=áå=cv=OMMU=ÇìÉ=íç=ÜáÖÜ=ÖäçÄ~ä= ÑççÇ=éêáÅÉë=~åÇ=íÜÉ=ÇçãÉëíáÅ=ÑìÉä=éêáÅÉ=áåÅêÉ~ëÉ=çÑ=^éêáä=OMMTK=kçíïáíÜëí~åÇáåÖ= ëìÄëáÇáåÖ=ÖäçÄ~ä=ÑççÇ=éêáÅÉëI=íÜÉ=áåÑä~íáçå=ê~íÉ=áë=ÉñéÉÅíÉÇ=íç=êÉã~áå=ÜáÖÜ=ÇìÉ=íç=íÜÉ= QM=B=áåÅêÉ~ëÉ=çÑ=~ÇãáåáëíÉêÉÇ=ÑìÉä=éêáÅÉë=~ååçìåÅÉÇ=íÜáë=ëìããÉê=Äìí=~äëç=ê~éáÇ= éêáî~íÉ=ÅêÉÇáí=ÖêçïíÜ=~í=OS=B=EvçvFK=^ë=~=êÉëéçåëÉI=íÜÉ=`Éåíê~ä=_~åâ=ê~áëÉÇ=íÜÉ=êÉéç= ê~íÉ=áå=pÉéíÉãÄÉê=íç=UKTR=B=~ÑíÉê=âÉÉéáåÖ=áí=ìåÅÜ~åÖÉÇ=Ñçê=NU=ãçåíÜëK=cáëÅ~ä=éçäáÅóI= çå=íÜÉ=çíÜÉê=Ü~åÇI=íìêåÉÇ=Éñé~åëáçå~êó=áå=íÜÉ=ÄìÇÖÉí=Ñçê=cv=OMMV=íç=~ÇÇêÉëë=íÜÉ= ëçÅá~ä=áãé~Åí=çÑ=íÜÉ=å~íìê~ä=Çáë~ëíÉêë=~åÇ=ÜáÖÜÉê=ÑççÇ=éêáÅÉëK=eçïÉîÉêI=~ÅÅçêÇáåÖ=íç= íÜÉ=fjc=íÜÉ=Éñé~åëáçå~êó=ÑáëÅ~ä=ëí~åÅÉ=áë=áåíÉåÇÉÇ=~ë=~=íÉãéçê~êó=ÇÉîá~íáçå=Ñêçã=íÜÉ= êÉëíê~áåÉÇ=ÑáëÅ~ä=éçäáÅó=íÜ~í=Ü~ë=éêÉî~áäÉÇ=áå=íÜÉ=êÉÅÉåí=é~ëíK=cáëÅ~ä=ëìëí~áå~Äáäáíó=áë= ëíáää=ÅÜ~ääÉåÖÉÇ=Äó=ä~êÖÉ=ëìÄëáÇáÉë=EÇÉëéáíÉ=êÉÅÉåí=ëìÄëí~åíá~ä=ÜáâÉë=áå=~ÇãáåáëíÉêÉÇ= éêáÅÉëF=~åÇ=ä~êÖÉ=ÅçåíáåÖÉåí=äá~ÄáäáíáÉë=áå=éìÄäáÅ=ëÉÅíçê=ÉåíÉêéêáëÉëK= = píêçåÖ=ÖêçïíÜ=çÑ=êÉãáíí~åÅÉë=~åÇ=áåÅêÉ~ëÉÇ=ÉñíÉêå~ä=~ëëáëí~åÅÉ=ëìééçêí=íÜÉ= Ä~ä~åÅÉ=çÑ=é~óãÉåíK=aÉëéáíÉ=~=ÇÉíÉêáçê~íáåÖ=íê~ÇÉ=Ä~ä~åÅÉI=íÜÉ=ÅìêêÉåí=~ÅÅçìåí= êÉã~áåÉÇ=áå=~=ëã~ää=ëìêéäìë=áå=cv=OMMU=çÑ=MKU=B=çÑ=dam=ëìééçêíÉÇ=Äó=ëìêÖáåÖ= ïçêâÉêëÛ=êÉãáíí~åÅÉë=~åÇ=~=êÉÅçîÉêó=çÑ=ÉñíÉêå~ä=~ëëáëí~åÅÉK=fåíÉêå~íáçå~ä=êÉëÉêîÉë= Ü~îÉ=êÉã~áåÉÇ=äçï=~êçìåÇ=O=ãçåíÜë=çÑ=åÉñí=óÉ~êëÛ=áãéçêíë=ïÜáÅÜ=Ü~ë=ÜçïÉîÉê=

important your attention is drawn to the statement on the back cover of this report which affects your rights.

SEB Merchant Banking Country Risk Analysis December 2, 2008

éêçîÉÇ=ëìÑÑáÅáÉåí=ÇìÉ=íç=~=Ñ~îçê~ÄäÉ=ã~íìêáíó=ëíêìÅíìêÉ=çÑ=ÉñíÉêå~ä=ÇÉÄí=Éëíáã~íÉÇ=~í= çåäó=PM=B=çÑ=damK== = mçäáíáÅ~ä=ìåÅÉêí~áåíó=~ÜÉ~Ç=çÑ=aÉÅÉãÄÉê=ÉäÉÅíáçåëK=_~åÖä~ÇÉëÜ=Ü~ë=ÄÉÉå=ìåÇÉê= ãáäáí~êó=êìäÉ=J=íÜÉ=íÜáêÇ=íáãÉ=áå=~ë=ã~åó=ÇÉÅ~ÇÉë=Ó=ëáåÅÉ=íÜÉ=mêÉëáÇÉåí=ÇÉÅä~êÉÇ=~= ëí~íÉ=çÑ=ÉãÉêÖÉåÅó=áå=g~åì~êó=OMMTK=qÜÉ=ãáäáí~êóJÄ~ÅâÉÇ=Å~êÉí~âÉê=ÖçîÉêåãÉåí=áë=äÉÇ= Äó=c~âÜêìÇÇáå=^ÜãÉÇJ=~=ÑçêãÉê=ÖçîÉêåçê=çÑ=íÜÉ=_~åÖä~ÇÉëÜ=`Éåíê~ä=_~åâ=Ó=~åÇ=áíë= ã~áå=í~ëâë=Ü~îÉ=ÄÉÉå=íç=éêÉé~êÉ=Ñçê=é~êäá~ãÉåí~êó=ÉäÉÅíáçåë=~åÇ=ÑáÖÜí=ïáÇÉëéêÉ~Ç= ÅçêêìéíáçåK=qÜÉ=Åçêêìéíáçå=ÑáÖÜí=êÉëìäíÉÇ=áå=íÜÉ=~êêÉëíë=çÑ=íçé=éçäáíáÅá~åë=~åÇ=çÑÑáÅá~äë= áåÅäìÇáåÖ=íÜÉ=íïç=äÉ~ÇÉêë=çÑ=íÜÉ=ã~áå=é~êíáÉë=Ó=hÜ~äÉÇ~=há~=çÑ=íÜÉ=_~åÖä~ÇÉëÜ= k~íáçå~ä=m~êíó=E_kmF=~åÇ=pÜÉáâ=e~ëáå~=t~àÉÇ=çÑ=íÜÉ=^ï~ãá=iÉ~ÖìÉ=E^iFK=vÉíI=~ÑíÉê= ~=óÉ~ê=áå=à~áä=íÜÉ=íïç=äçåÖJíÉêã=êáî~äë=~êÉ=Ä~Åâ=áå=éçäáíáÅë=~åÇ=íÜÉ=ÖçîÉêåãÉåí=Ü~ë= êÉÅÉåíäó=ÇÉÅä~êÉÇ=íÜ~í=íÜÉó=ïáää=Ñ~ÅÉ=åç=äÉÖ~ä=çÄëí~ÅäÉ=íç=í~âÉ=é~êí=áå=íÜÉ= é~êäá~ãÉåí~êó=ÉäÉÅíáçåëK=qÜÉ=ÉäÉÅíáçåë=Ó=ëÅÜÉÇìäÉÇ=Ñçê=aÉÅÉãÄÉê=OV=Ó=ïáää=êÉíìêå=íÜÉ= Åçìåíêó=íç=ÇÉãçÅê~íáÅ=ÖçîÉêå~åÅÉK=eçïÉîÉêI=íÜÉ=éçäáíáÅ~ä=ëáíì~íáçå=áë=ÅçãéäÉñ=~åÇ= Ñê~ÖáäÉK=^=åìãÄÉê=çÑ=Ñ~Åíçêë=ÅçìäÇ=åÉÖ~íáîÉäó=~ÑÑÉÅí=íÜÉ=ÉäÉÅíáçåë=~åÇ=íÜÉáê=~ÑíÉêã~íÜI= áåÅäìÇáåÖ=é~êíó=ÄçóÅçííë=~åÇ=éçäáíáÅ~ä=îáçäÉåÅÉK== = JJGJJ= = aÉëéáíÉ=ëÉîÉê~ä=å~íìê~ä=Çáë~ëíÉêë=~åÇ=ÜáÖÜ=ÖäçÄ~ä=ÑççÇ=~åÇ=çáä=éêáÅÉëI=íÜÉ=ÉÅçåçãó= ÅçåíáåìÉÇ=íç=Éñé~åÇ=ê~éáÇäó=ÇìêáåÖ=cv=OMMU=ëìééçêíÉÇ=Äó=ëíêçåÖÉê=Éñéçêí=çÑ= Ö~êãÉåíë=~åÇ=ïçêâÉêëÛ=êÉãáíí~åÅÉëK=qÜÉ=ÅìêêÉåí=~ÅÅçìåí=Ä~ä~åÅÉ=ëíáää=éçëíë=~=ëã~ää= ëìêéäìë=~åÇ=ÉñíÉêå~ä=ÇÉÄí=êÉã~áåë=äçï=~åÇ=ã~áåäó=äçåÖJíÉêã=êÉÇìÅáåÖ=íÜÉ=äáèìáÇáíó= êáëâ=áå=ÅìêêÉåí=ÖäçÄ~ä=Ñáå~åÅá~ä=ÅçåÇáíáçåëK=eçïÉîÉêI=íÜÉ=ÜáÖÜ=áåÑä~íáçå=ê~íÉI=äçï= áåíÉêå~íáçå~ä=êÉëÉêîÉë=EëäáÖÜíäó=~ÄçîÉ=O=ãçåíÜë=çÑ=áãéçêí=ÅçîÉê~ÖÉF=~åÇ=ïáÇÉëéêÉ~Ç= éçîÉêíó=éçëÉ=ÅÜ~ääÉåÖÉë=íç=ÉÅçåçãáÅ=éçäáÅáÉëK=bëéÉÅá~ääó=áå=îáÉï=çÑ=íÜÉ=çåÖçáåÖ= ÖäçÄ~ä=êÉÅÉëëáçå=íÜ~í=ÅçìäÇ=Üìêí=Éñéçêí=ÇÉã~åÇ=~åÇ=áåÑäçï=çÑ=ïçêâÉêëÛ=êÉãáíí~åÅÉëK= lå=íÜÉ=éçäáíáÅ~ä=ëáÇÉI=íÜÉ=ìéÅçãáåÖ=é~êäá~ãÉåí~êó=ÉäÉÅíáçåë=Ó=íÜÉ=Ñáêëí=ëáåÅÉ=OMMN=Ó= ÅçìäÇ=êáëâ=êÉëìäíáåÖ=áå=éçäáíáÅ~ä=íìêãçáä=ÜìêíáåÖ=åÉ~êJíÉêã=éêçëéÉÅíëK== = =

Key ratios

2008

Population (mill.)

161.3

GDP/capita ($)

493

GDP (change)

6.2%

Inflation

9.9%

Curr.Acc. Balance/GDP

0.8%

Reserves/imports (months) Budget balance/GDP

Resilience 10 9 8 7 6

Macro balance

5 4 3 2

Liquidity

1 0

Absence of event risk

3

Bangladesh

-4.8%

Government debt/GDP bñíÉêå~ä=ê~íáåÖëW= cáíÅÜW=kçí=ê~íÉÇ jççÇóDëW=kçí=ê~íÉÇ= pCmW==kçí=ê~íÉÇ

How to read the chart? Moving out from the center reduces risk.

Information

Average EM

Sri Lanka

44% mÉÉêëW

Graph: The pentagon shows the creditworthiness of Bangladesh as typically "flatt", i.e. weak on resilience, event risk and information but stronger on economics including liquidity -- flattered by very low short debt

pêá=i~åâ~=

fê~å= bíÜáçéá~=

=

= = = 2

SEB Merchant Banking Country Risk Analysis December 2, 2008

= Key data: 2003 2004 2005 2006 GDP (bill.US$) 52 56 58 60 GDP/capita (US$) 350 372 376 387 GDP (change) 5.2% 6.3% 6.0% 6.6% Investments/GDP 26% 27% 29% 31% Budget balance/GDP -3.3% -3.3% -3.5% -3.5% Govt debt/GDP 53% 51% 48% 47% CPI inflation (%) 5.7% 9.2% 7.0% 6.8% Money demand (%) 15% 14% 14% 16% Stock prices (%change) 2% 14% 104% -15% Interest rates 8.2% 7.8% 7.1% 8.1% Exch. Rate ($) 58.2 59.5 64.3 68.9 Trade/GDP (%) 35% 38% 41% 47% Oil price (Brent) $29 $38 $54 $65 Billions US $ 7.1 8.2 9.3 11.6 Export of goods Imports of goods 10.9 12.9 14.4 16.8 Other: 4.0 4.9 4.5 5.8 Current account 0.1 0.2 -0.6 0.6 (% of GDP) 0.3% 0.4% -1.0% 1.0% FDI 0.1 0.3 0.4 0.8 Loan repayments -0.5 -0.6 -0.5 -0.5 Net other capital flows 1.2 0.7 0.2 0.2 Balance of payments 0.9 0.6 -0.4 1.0 Reserves (bill $) 2.6 3.2 2.8 3.8 Total debt 20.6 22.3 21.3 23.3 o/w short term debt 1.5 1.8 2.1 2.4 Source: OEF (Oxford Economic Forecasting) and SEB estimates.

2007

2008

2009

2010

68 428 6.5% 32% -4.2% 47% 9.1%

80 493 6.2% 36% -4.8% 44% 9.9%

89 541 5.6% 40% -4.5% 44% 8.5%

97 581 5.4% 43% -4.0% 43% 6.7%

20%

17%

15%

13%

-6% 9.1% 68.9 47% $73

91% 9.9% 68.6 46% $96

10.9% 70.5 45% $50

11.9% 72.7 44% $53

12.4 19.5 8.0 0.9 1.4% 0.7 -0.5 0.5 1.6 5.4 23.1 2.8

13.8 23.1 10.0 0.7 0.8% 0.8 -0.5 -0.2 0.7 6.1 23.4 3.2

14.9 24.9 10.7 0.7 0.8% 0.7 -0.5 0.0 0.9 7.0 23.4 3.8

16.1 26.7 11.0 0.4 0.4% 0.8 -0.6 0.2 0.9 7.9 23.8 4.1

Rating history Not rated Not rated Not rated Parliamentary democracy December 29, 2008 None PRGF (Poverty Reduction and Growth Facility)

Dhaka Stock exchange 3250 3000 2750 2500 2250 2000 1750 1500 1250 1000 750 500

2002

Exchange rates 72.5

110

70.0

100

USD/BDT

67.5

90 EUR/BDT (rhs)

65.0

80

62.5

70

60.0

USD/BDT (lhs)

57.5

2006

02

2008 Source: Reuters EcoWin

60 50

55.0

2004

EUR/BDT

Fitch (eoy) Moody's (eoy) S&P (eoy) Type of government: Next elections Other: Latest PC deal Recent IMF programs

40

04

06

08 Source: Reuters EcoWin

= 3

=

SEB Merchant Banking Country Risk Analysis December 2, 2008

= = =

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4