The sudden resignation of Prime Minister Sheikh Hasina has plunged Bangladesh into political turmoil today. Despite the upheaval, economic experts suggest that if peace and stability are quickly restored, the country's economy may avoid major long-term damage, Gareth Leather and Shilan Shah, Asia analysts at Capital Economics, said in a note on August 5.

Sheikh Hasina’s unexpected resignation follows several weeks of escalating demonstrations in which more than 300 people have died. Another 54 people were reportedly killed on the day that Hasina stepped down and fled the country.

Initially sparked by student protests against a job quota system, the unrest has escalated rapidly in recent days into a broader anti-government protest.

Hasina, who secured a fifth term in elections earlier this year, has delivered on an economic transformation of the country which has flourished; however, her longevity in politics has garnered criticism and accusations of an increasingly authoritarian style of government.

She appeared resolute over the weekend in the face of mounting dissent, but fled for India when the damn burst on August 5. However, it appears that the transition to a new government will proceed smoothly. In a live television address, Bangladesh’s army chief, Waker-uz-Zaman, confirmed that an interim government will be formed, although the details on the timing and leadership of the new government remain unclear.

As the crisis has unfolded there has been some economic impact. In the wake of the violence, garment factories across Bangladesh have shut down, along with other factories and shops. Garments constitute around 90% of Bangladesh’s total exports, making the reopening of these factories a top economic priority.

“There is a danger that the violence makes Bangladesh a less attractive destination for investors, prompting garment makers to go elsewhere. But provided peace and stability [are] restored to the streets soon, we suspect that the long-term impact on the sector will be relatively small,” Capital Economics said in a note. “The appeal of Bangladesh as a home of cheap, young and plentiful workers will not disappear overnight.”

Bangladesh's history of political unrest suggests that investor confidence may not waver significantly, as many are accustomed to such volatility.

Even before the protests, Bangladesh was already considered one of the least stable countries in the region, and was ranked accordingly.

Another significant risk is the potential for a rapid withdrawal of foreign capital. However, these concerns appear manageable, the analysts said. According to the recently updated EM Financial Risk Monitor for the second quarter, Bangladesh is flagged as “low” risk for banking, sovereign and currency vulnerabilities.

One measure of currency vulnerability is a country’s gross external financing requirement, which includes short-term external debt and the current account deficit. This requirement indicates the foreign capital inflows needed over the next year to finance the current account deficit and roll over maturing external debt. On this measure, Bangladesh's external financing needs are not particularly large.