Bangladesh Bank expects the economic growth to be buoyant during the current fiscal year, which will be in line with the budget target of 8.20 per cent.
While the central bank is hopeful about keeping the inflation rate within 5.50 per cent band as set in the FY'20 national budget, it is mindful of an uptick.
"Recent upward revisions of domestic gas prices, augmented prices of goods and services resulting from the implementation of new VAT law," the BB said in its annual report.
Expanded coverage of VAT law and weakening taka resulting from the increased demand for foreign exchange are potential sources of risk that can create upward pressure on the consumer price index inflation, it added.
The annual report for FY'19 was released on Thursday in Dhaka, eight months after the fiscal year.
But the report didn't mention anything about the possible impact of the coronavirus pandemic that has already unsettled the global economy, with dire warnings coming from the international financial institutions and OECD.
On the domestic front, BB's buoyant outlook on economic growth is based on several factors.
Strong growth in exports underpinned by trade redirection resulted from tensions between the USA and China; robust growth in private consumption expenditure resulted from increased remittances; accommodative private sector credit policy; continued reform programmes to reduce the cost of doing business; and accelerated government spending in the development infrastructural sector are among the factors.
The report mentioned that despite slowdown in global economic activities, exports of Bangladesh are expected to grow strongly, driven by trade redirection caused by US and China trade tensions.
The central bank is optimistic that exports to "newly penetrated markets are expected to augment further."
Also, imports would grow faster due to the pick-up in the implementation of large infrastructural projects and those require huge imports of capital machinery and other raw materials.
"Inflow of workers' remittances growth is likely to slow down as the number of people seeking job abroad declined, it warned. Focusing on the financial sector, the report said that the country's financial system was "reasonably stable" during the last fiscal year.
The current stability "could also be attributed to a number of policy initiatives taken by Bangladesh Bank in recent times," according to the report.
