Bangladesh: General election victory extends PM Sheikh Hasina’s long rule

Event

On 7 January, PM Sheikh Hasina’s Awami League won the country’s general elections again, with a strong majority, allowing her to prolong her rule for another five years. Main opposition party BNP and its allies boycotted the polls, denouncing the absence of a caretaker government to administer elections and the continued crackdown on the opposition. New Delhi and Beijing, Dhaka’s two close partners, congratulated Sheikh Hasina.  

Impact

This is Sheikh Hasina’s fifth (and fourth consecutive) mandate, making her the longest serving PM of the country in its 52 years of independence. In absence of participating rivals, her victory was secure even before the elections took place. In consequence, political stability might look ensured until 2028. However, months of large protests leading to economic disruptions and the Awami League’s internal fighting might undermine political stability in the future and potentially fuel violent protests, certainly in the months to come. Besides perceived electoral discontent, reflected by a much lower turnout (40%) compared to previous elections, the persisting high cost of living is a downside risk that will continue to be closely monitored. Indeed, the social costs related to high inflation (which eased slightly to 9.5% last November) will maintain pressures on the PM, who is expected to focus on improving economic conditions for the start of her new mandate.

More generally, the economy is facing external headwinds not only from high imported food prices (even though they are easing) but also from the economic slowdown in China and top US and EU export markets. Hence, this year does not bode well for Bangladesh’s garment sector, which is the dominant economic activity and source of employment in the country. The World Bank recently confirmed GDP growth could slow down from 6% to 5.6% this year. Despite a challenging political and economic outlook, Credendo keeps its country risk ratings unchanged at this stage. The outlook is nevertheless negative for ST political risk (4/7) as the downward trend of the past two years in foreign exchange reserves has yet to cease. End of 2023, the country’s import cover was less than 2.5 months, i.e. three times less than in 2021.

The same negative outlook applies to MLT political risk (4/7) as a result of other negative developments, particularly deteriorated public finances – public debt accounts for more than 450% of government revenues – and weakening institutional standards, whereas the country is highly vulnerable to climate change. Those risks might not improve in the foreseeable future. Moreover, the current account deficit could significantly widen as of 2025, as imports of capital goods are expected to soar on the back of a forecasted sharp expansion in foreign direct investments (FDI). 

Analyst: Raphaël Cecchi – r.cecchi@credendo.com