Bangladesh

SEB MERCHANT BANKI NG – COUNTRY RI SK ANALYSI S December 2, 2008

important your attention is drawn to the statement on the back cover of this report which affects your rights.
Analysts: Jenny Nordgren. Tel: +46 8 763 96 05. E-mail: jenny.nordgren@seb.se

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=Despile severaI naluraI disaslers, economic
grovll remained slrong in fiscaI year (IY) 2008 (ending Iune) al above 6 °
supporled by a bumper larvesl in
ApriI, a picI up in garmenl exporls (75
° of lolaI exporls) and very slrong
grovll in remillances. NeverlleIess,
poverly is sliII videspread (per capila
income is onIy aboul USD 500) and lle
counlry is vuInerabIe lo naluraI
disaslers and cIimale clange. AIso, lle
ongoing sIovdovn in lle gIobaI
economy damps economic near-lerm
prospecls in lerms of Iover exporl
demand and a polenliaI reduclion of vorIers' remillances.
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
2003 2004 2005 2006 2007 2008
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
GDP (lhs) Inflation (rhs)

fåÑä~íáçå=êÉã~áåë=ÜáÖÜ. InfIalion increased marIedIy in IY 2008 due lo ligl gIobaI
food prices and lle domeslic fueI price increase of ApriI 2007. Nolvillslanding
subsiding gIobaI food prices, lle infIalion rale is expecled lo remain ligl due lo lle
40 ° increase of adminislered fueI prices announced llis summer bul aIso rapid
privale credil grovll al 26 ° (YoY). As a response, lle CenlraI BanI raised lle repo
rale in Seplember lo 8.75 ° afler Ieeping il unclanged for 18 monlls. IiscaI poIicy,
on lle oller land, lurned expansionary in lle budgel for IY 2009 lo address lle
sociaI impacl of lle naluraI disaslers and ligler food prices. Hovever, according lo
lle IMI lle expansionary fiscaI slance is inlended as a lemporary devialion from lle
reslrained fiscaI poIicy llal las prevaiIed in lle recenl pasl. IiscaI suslainabiIily is
sliII claIIenged by Iarge subsidies (despile recenl subslanliaI liIes in adminislered
prices) and Iarge conlingenl IiabiIilies in pubIic seclor enlerprises.

píêçåÖ=ÖêçïíÜ=çÑ=êÉãáíí~åÅÉë=~åÇ=áåÅêÉ~ëÉÇ=ÉñíÉêå~ä=~ëëáëí~åÅÉ=ëìééçêí=íÜÉ=
Ä~ä~åÅÉ=çÑ=é~óãÉåíK=Despile a delerioraling lrade baIance, lle currenl accounl
remained in a smaII surpIus in IY 2008 of 0.8 ° of GDI supporled by surging
vorIers' remillances and a recovery of exlernaI assislance. InlernalionaI reserves
lave remained Iov around 2 monlls of nexl years' imporls vlicl las lovever
SEB Merchant Banking Country Risk Analysis December 2, 2008

2
proved sufficienl due lo a favorabIe malurily slruclure of exlernaI debl eslimaled al
onIy 30 ° of GDI.

mçäáíáÅ~ä=ìåÅÉêí~áåíó=~ÜÉ~Ç=çÑ=aÉÅÉãÄÉê=ÉäÉÅíáçåë. BangIadesl las been under
miIilary ruIe - lle llird lime in as many decades ÷ since lle Iresidenl decIared a
slale of emergency in Ianuary 2007. Tle miIilary-bacIed carelaIer governmenl is Ied
by IaIlruddin Almed- a former governor of lle BangIadesl CenlraI BanI ÷ and ils
main lasIs lave been lo prepare for parIiamenlary eIeclions and figll videspread
corruplion. Tle corruplion figll resuIled in lle arresls of lop poIilicians and officiaIs
incIuding lle lvo Ieaders of lle main parlies ÷ KlaIeda Kia of lle BangIadesl
NalionaI Iarly (BNI) and SleiI Hasina Wajed of lle Avami Ieague (AI). Yel, afler
a year in jaiI lle lvo Iong-lerm rivaIs are bacI in poIilics and lle governmenl las
recenlIy decIared llal lley viII face no IegaI obslacIe lo laIe parl in lle
parIiamenlary eIeclions. Tle eIeclions ÷ scleduIed for December 29 ÷ viII relurn lle
counlry lo democralic governance. Hovever, lle poIilicaI silualion is compIex and
fragiIe. A number of faclors couId negaliveIy affecl lle eIeclions and lleir aflermall,
incIuding parly boycolls and poIilicaI vioIence.

--´--

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) 3
Budget balance/GDP -4.8%
Government debt/GDP 44%
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
bñíÉêå~ä=ê~íáåÖëW=
Iilcl: Nol raled
Moody's: Nol raled
S&I: Nol raled
mÉÉêëW
Sri IanIa
Iran
Llliopia
0
1
2
3
4
5
6
7
8
9
10
Resilience
Liquidity
Information
Absence of event
risk
Macro balance
Bangladesh Average EM
Sri Lanka
How to read the chart?
Moving out from the center
reduces risk.





SEB Merchant Banking Country Risk Analysis December 2, 2008

3

Key data: 2003 2004 2005 2006 2007 2008 2009 2010
GDP (bill.US$) 52 56 58 60 68 80 89 97
GDP/capita (US$) 350 372 376 387 428 493 541 581
GDP (change) 5.2% 6.3% 6.0% 6.6% 6.5% 6.2% 5.6% 5.4%
Investments/GDP 26% 27% 29% 31% 32% 36% 40% 43%
Budget balance/GDP -3.3% -3.3% -3.5% -3.5% -4.2% -4.8% -4.5% -4.0%
Govt debt/GDP 53% 51% 48% 47% 47% 44% 44% 43%
CPI inflation (%) 5.7% 9.2% 7.0% 6.8% 9.1% 9.9% 8.5% 6.7%
Money demand (%) 15% 14% 14% 16% 20% 17% 15% 13%
Stock prices (%change) 2% 14% 104% -15% -6% 91%
Interest rates 8.2% 7.8% 7.1% 8.1% 9.1% 9.9% 10.9% 11.9%
Exch. Rate ($) 58.2 59.5 64.3 68.9 68.9 68.6 70.5 72.7
Trade/GDP (%) 35% 38% 41% 47% 47% 46% 45% 44%
Oil price (Brent) $29 $38 $54 $65 $73 $96 $50 $53
Billions US $
Export of goods 7.1 8.2 9.3 11.6 12.4 13.8 14.9 16.1
Imports of goods 10.9 12.9 14.4 16.8 19.5 23.1 24.9 26.7
Other: 4.0 4.9 4.5 5.8 8.0 10.0 10.7 11.0
Current account 0.1 0.2 -0.6 0.6 0.9 0.7 0.7
(% of GDP) 0.3% 0.4% -1.0% 1.0% 1.4% 0.8% 0.8% 0.4%
FDI 0.1 0.3 0.4 0.8 0.7 0.8 0.7
Loan repayments -0.5 -0.6 -0.5 -0.5 -0.5 -0.5 -0.5 -0.6
Net other capital flows 1.2 0.7 0.2 0.2 0.5 -0.2 0.0
Balance of payments 0.9 0.6 -0.4 1.0 1.6 0.7 0.9
Reserves (bill $) 2.6 3.2 2.8 3.8 5.4 6.1 7.0
Total debt 20.6 22.3 21.3 23.3 23.1 23.4 23.4 23.8
o/w short term debt 1.5 1.8 2.1 2.4 2.8 3.2 3.8
Source: OEF (Oxford Economic Forecasting) and SEB estimates.
Rating histor
0.4
0.8
0.2
0.9
7.9
4.1
y
Fitch (eoy) Not rated
Moody's (eoy) Not rated
S&P (eoy) Not rated
Type of government: Parliamentary democracy
Next elections December 29, 2008
Other:
Latest PC deal None
Recent IMF programs PRGF (Poverty Reduction and Growth Facility)
Dhaka Stock exchange
Source: Reuters EcoWin
2002 2004 2006 2008
500
750
1000
1250
1500
1750
2000
2250
2500
2750
3000
3250
Exchange rates
Source: Reuters EcoWin
02 04 06 08
E
U
R
/
B
D
T
40
50
60
70
80
90
100
110
U
S
D
/
B
D
T
55.0
57.5
60.0
62.5
65.0
67.5
70.0
72.5
USD/BDT (lhs)
EUR/BDT (rhs)



SEB Merchant Banking Country Risk Analysis December 2, 2008

4
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Tle informalion in llis documenl las been compiIed by SLB Merclanl BanIing, a
division villin SIandinavisIa LnsIiIda BanIen AB (pubI) (“SLB¨).

Opinions conlained in llis reporl represenl lle banI's presenl opinion onIy and are
subjecl lo clange villoul nolice. AII informalion conlained in llis reporl las been
compiIed in good faill from sources beIieved lo be reIiabIe. Hovever, no
represenlalion or varranly, expressed or impIied, is made vill respecl lo lle
compIeleness or accuracy of ils conlenls and lle informalion is nol lo be reIied upon
as aullorilalive. Anyone considering laIing aclions based upon lle conlenl of llis
documenl is urged lo base lis or ler inveslmenl decisions upon sucl invesligalions
as le or sle deems necessary. Tlis documenl is being provided as informalion onIy,
and no specific aclions are being soIiciled as a resuIl of il: lo lle exlenl permilled by
Iav, no IiabiIily vlalsoever is accepled for any direcl or consequenliaI Ioss arising
from use of llis documenl or ils conlenls.

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