The US-based global credit agency Moody’s in its latest analysis released recently stated that the recent terror attack at the Holey Artisan Bakery in Bangladesh may erode investors’ confidence, which could cast an adverse impact on Bangladesh’s ability to attract Foreign Direct Investment (FDI) besides impacting the flourishing readymade garment sector of the country.
Also Read – US Apparel and Footwear Industry to be Stable: Moody’s Report
“It was the most damaging of a series of attacks targeting foreigners and minorities over the past year, and highlighted political risks that are factored into our Government bond rating, through our assessment that Bangladesh’s vulnerability to political event risks is moderate,” the Moody’s Investors Service said in its latest analysis, adding, “However, the frequency of violent attacks such as the one last week is rising, signalling rising political risks that could further distract the authorities from their economic and institutional goals. Besides, prolonged political or geopolitical instability could erode investor confidence and a worsening of the external payments position. The most direct impact would be on Bangladesh’s ability to attract foreign investment.”
The agency also pointed out that adverse trends in foreign investment would be particularly detrimental to garment exports, a predominant growth driver. Exports incidentally comprise 16.3 per cent of Bangladesh’s GDP (Gross Domestic Product), and sustaining foreign investment in the textile sector, which accounts for 80 per cent of the total export basket, is crucial for the country’s growth.
Also Read – Dhaka Terror Attack: Garment industry faces the brunt!
“Bangladesh’s domestic politics have long been tumultuous. Relations between the two main parties are highly polarized, culminating in frequent and disruptive strikes and protests. Nonetheless, historical trends suggest that neither FDI nor export growth has been particularly sensitive to such tensions, which have tended to escalate in the run-up to elections,” said Moody’s, adding, “Terrorist attacks can have long-lasting effects on a country’s economy, ranging from growth to investment and borrowing costs.”
