Tuesday 28 / July / 2026
Dhaka: S&P Global has revised Bangladesh's long-term sovereign outlook to negative from stable, citing mounting risks from the country's fragile banking sector, fiscal constraints, volatile global energy markets, and uncertain trade conditions.
In its latest outlook report released on July 27, the ratings agency said the outlook revision reflects growing concerns that Bangladesh's economic recovery could be slower and more prolonged than previously expected.
"We revised the outlook to negative due to the increasing risks to Bangladesh's economy posed by a weak domestic banking sector, fiscal constraints, external headwinds, and the growing prospect of a more protracted recovery," S&P said.
The agency maintained that Bangladesh's credit profile remains constrained by modest per capita income, limited fiscal flexibility driven by weak revenue generation, and a rising government interest burden. Institutional and administrative challenges also continue to weigh on the country's ratings.
S&P said sustained stability in Bangladesh's external accounts will depend on strong remittance inflows, a recovery in the readymade garment (RMG) sector, and continued support from multilateral lenders.
The move follows a similar decision by Fitch Ratings in May 2026, when it revised Bangladesh's outlook to negative from stable, citing macroeconomic vulnerabilities linked to tensions in the Middle East.
According to S&P, Bangladesh's economic outlook remains vulnerable to several downside risks, including the ongoing conflict in the Middle East, financial sector imbalances, and energy market disruptions, all of which could hinder export growth and economic recovery over the next 12 to 18 months.
The agency warned that it could downgrade Bangladesh's sovereign rating if long-term economic growth weakens further, aligning more closely with peer economies of similar income levels, or if the country's external position deteriorates significantly.
It highlighted risks such as rising net external debt, widening current account deficits, declining export earnings, or a failure to rebuild foreign exchange reserves as potential triggers for a downgrade.
S&P noted that Bangladesh's economy has slowed considerably over the past three years and projected annual GDP growth to average around 4.5 percent over the next three years, reflecting persistent banking sector weakness, uncertainty in global energy markets, and mixed prospects for garment exports.
The report said the February 2026 national election, which gave the Bangladesh Nationalist Party (BNP)-led government a strong mandate, could provide a more stable policy environment and improve prospects for implementing economic reforms.
However, the agency cautioned that significant challenges remain. The economy continues to recover from the political crisis of 2024 while the banking sector undergoes major consolidation to address poor asset quality.
Inflation also remains elevated due to energy market disruptions, limiting household purchasing power through higher fuel and electricity prices and restraining private consumption.
While Bangladesh's garment industry remains globally competitive because of its low labor costs and abundant workforce, external demand remained uneven during fiscal year 2025-26, weighing on export performance.
S&P also noted uncertainty surrounding U.S. trade policy. Since July 24, 2026, Bangladesh has been subject to a 10 percent U.S. tariff on most goods exported to the American market, adding further pressure to the country's export outlook.
The ratings agency concluded that Bangladesh still faces structural challenges, including institutional weaknesses, infrastructure gaps, and bureaucratic inefficiencies, and said meaningful reforms will take time.
It added that continued improvements in the external sector will depend on energy price developments and ongoing multilateral support, while banking and fiscal reforms will be critical to ensuring long-term macroeconomic stability.
S&P expects Bangladesh to continue gradually rebuilding its foreign exchange reserves, although it warned that prolonged high energy prices could undermine that progress.
