S&P downgrades Bangladesh’s credit rating outlook to 'Negative'

Global rating agency S&P Global Ratings has revised Bangladesh’s long-term sovereign credit rating outlook from ‘Stable’ to ‘Negative’, citing persistent vulnerabilities in the banking sector, limited fiscal flexibility, energy market volatility, and growing trade risks.

In an assessment report released on Monday, S&P warned that financial sector imbalances, constrained government revenue generation, and broader global economic uncertainties could prolong Bangladesh’s economic recovery and elevate macroeconomic risks in the coming years.

The credit rating agency noted that Bangladesh continues to face structural headwinds, including low per capita income, weak revenue collection capacity, high debt service costs, and lingering administrative and institutional bottlenecks.

According to S&P, the country’s external stability will depend heavily on remittance inflows, a sustained recovery in ready-made garment (RMG) exports, and continued financial support from international development partners.

Growth forecast capped at 4.5 percent: S&P has projected Bangladesh’s economic growth to average around 4.5 percent over the next three years�"lower than historical trends. The agency attributed the subdued growth forecast to ongoing restructuring efforts aimed at addressing high non-performing loans (NPLs) in the banking system, residual impacts of the 2024 political crisis, and uncertainties surrounding energy supply and global RMG demand.

"High inflation and energy supply constraints continue to squeeze consumer purchasing power, slowing the domestic demand recovery," the report highlighted, adding that while Bangladesh maintains a competitive edge in RMG due to abundant labor, export momentum in FY2025�"26 remained sluggish.

Rising external and trade headwinds: The rating agency also flagged international trade policy shifts as a key challenge, noting that a recently introduced US tariff policy�"imposing a 10% tariff on goods from several countries, including Bangladesh�"presents new uncertainties for the export-oriented economy.�"UNB