However, Bangladesh needs to overcome several challenges to sustain the momentum for medium to long term
The Asian Development Bank (ADB) has predicted that Bangladesh's economy will grow at eight percent in the 2019-20 fiscal year, the highest in the Asia Pacific, followed by India at 7.2 percent.
The growth projection for Bangladesh's Gross Domestic Product this fiscal year is much above the Asian average growth projection of 5.5 percent, and nearly corresponds to the government projection of 8.2 percent.
The country is expected to sustain high growth in FY19-20 despite deterioration in global growth and trade conditions, said the Asian Development Outlook 2019, published by the regional development bank on Wednesday.
In 2019, the global economy will grow at 2.6 percent before inching up to 2.7 percent in 2020, according to the World Bank.
The ADB report said inflation in Bangladesh may edge up to 5.8 percent on upward adjustments to domestic gas price hike, expansion of VAT coverage and depreciation of the Taka against a rising demand for foreign exchange.
The growth will be driven chiefly by buoyant exports from trade redirection in response to the US-China trade conflict, robust private consumption aided by higher remittances, accommodative monetary policy for private sector credit, ongoing reforms to improve business climate and higher infrastructure spending.
The overall economic growth is made up of 3.8 percent increase in agriculture, 12.5 percent in industry and 6.4 percent in the service sector.
The ADB outlook said agriculture is expected to rise to 3.8 percent because government policy has improved prices of agro products.
Industry growth is expected to stay at double digits with the domestic demand continuing to be powered by remittances, and the central bank promoting investment in productive pursuits.
And the growth of the service sector is expected to be supported by the continuous expansion in the agriculture and the industry sectors.
"Despite weaker global growth, favourable trade prospects are expected to continue [in Bangladesh]. Exports and remittances are likely to be further strengthened," said Manmohan Parkash, country director at the ADB resident mission Bangladesh.
"Strong public investment due to continued policy environment, and expediting implementation of large infrastructure projects are also envisaged. We see such momentum to continue in FY19-20," he added.
Manmohan also said ADB's outlook indicates that Bangladesh's economy is likely to continue as the fastest growing economy in Asia and the Pacific.
To sustain this momentum in the medium to long term, however, ADB focused on some challenges that Bangladesh has to overcome.
It suggested that the country should expand its industrial base, diversify the export basket, ensure equitable development in both rural and urban areas and confirm a sound financial system.
They also called for speeding up reforms to improve the business environment for vibrant private sector development.
Welcoming the implementation of the VAT law, they recommended further expansion of the tax base and promotion of an efficient tax administration for improved resource mobilisation.
ADB also underscored development of human capital to meet the growing needs of the private sector.
"The new special economic zones are ushering in huge domestic and foreign direct investment. But without the development of human capital, it is not possible to harvest maximum outcome from the special economic zones," said Manmohan Parkash.
The report said such momentum needs to be sustained in the medium to long term to achieve the country's goal to become an upper middle income nation and subsequently a high-income one.
ADB's Senior Economist Soon Chan Hong suggested that Bangladesh should continue emphasising its prudent macroeconomic policies, sound debt management, resource mobilisation and strengthening the banking sector.
The government should continue its support in removing infrastructure constraints, promoting skills development and improving the cost of doing business, the economist said. He added that all these measures will help the government achieve its long-term vision.