Bangladesh’s economy rebounded in the second half of FY25 after early-year disruptions, driven by strong exports, record remittances, and a rise in foreign exchange reserves, according to the World Bank’s latest Bangladesh Development Update. The report notes that while the country is expected to maintain medium-term growth, urgent reforms are essential to sustain momentum and create jobs, particularly for youth and women. GDP is projected to rise from 4.0 percent in FY25 to 4.8 percent in FY26, reaching 6.3 percent in FY27.
External pressures eased in FY25 as Bangladesh adopted a market-based exchange rate, stabilized foreign exchange reserves, narrowed the current account deficit, and saw robust export growth. Inflation moderated due to tight monetary policy, lower essential food import duties, and strong harvests. However, the fiscal deficit widened amid weak tax revenues and higher subsidies and interest payments. Poverty increased between 2023 and 2024, while labor force participation declined from 60.9 to 58.9 percent, with women disproportionately affected; of three million additional working-age people outside the labor force, 2.4 million were women.
Jean Pesme, World Bank Division Director for Bangladesh and Bhutan, emphasized that while the economy has shown resilience, sustaining growth requires bold and timely reforms. These include enhancing domestic revenue mobilization, addressing banking sector vulnerabilities, reducing energy subsidies, planning urbanization, and improving the investment climate to create more and better jobs.
The report also highlights long-term structural changes in employment, population distribution, and infrastructure development. Industrial jobs are increasingly concentrated in Dhaka and Chattogram, and the World Bank calls for a rethinking of spatial development strategies to reduce regional disparities and support inclusive job creation across the country.
The Bangladesh Development Update accompanies the South Asia Development Update: Jobs, AI, and Trade, which projects strong regional growth at 6.6 percent in 2025 but warns of a potential slowdown. The report emphasizes that reforms promoting trade openness and AI adoption can help South Asia—including Bangladesh—boost productivity, spur private investment, and create employment. High tariffs in the region hinder manufacturing and restrict opportunities, while lower-tariff sectors like services have driven most employment growth. Carefully sequenced trade reforms and AI integration can enhance competitiveness and create significant job opportunities.
The World Bank underscores that increasing trade openness and strategically adopting AI could transform South Asia’s economies. Policy measures facilitating worker reallocation across firms, sectors, and regions are critical to channeling resources into productive activities, fostering investment, and accelerating inclusive job creation in Bangladesh and the wider region.
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