The slowdown in European economies and the Trans-Pacific Partnership agreement may affect Bangladesh’s external trade in 2016. A protracted slowdown in the European Union could hurt exports. Implementation of the Trans-Pacific Partnership, of which Bangladesh is not a member, could also erode the competitiveness of exports to TPP member countries, which account for around one-fourth of Bangladesh’s exports.

The TPP trade deal signed among 12 nations accounts for nearly 40 per cent of the global economy. In addition, the country has to cope with political uncertainty and a weak banking sector. A resumption of political violence or heightened uncertainty would adversely impact investment, growth, and lead to inflation. Continued weakness in the banking sector could undermine credit and growth prospects and affect fiscal sustainability.

Moreover, the outlook for remittances in 2016 is uncertain. While worker outflows have recovered, persistent low oil prices could eventually affect investment and employment in key host countries. From a broader perspective, natural disasters and global climate change pose major risks for Bangladesh.

The bright spot is that Bangladesh enjoys significant cost and scale advantages. Linkages with large emerging market economies and international financial markets remain limited, cushioning against potential shocks from these sources.