The World Bank has projected that Bangladesh's economy will remain under pressure for another year, with the Gross Domestic Product (GDP) expected to decrease to 4% in the current fiscal year.
However, the GDP is forecasted to rise to 5.5% in the 2025-26 fiscal year.
At a press conference held at the World Bank office in Agargaon, Dhaka, on Tuesday (15 October), the institution's Bangladesh Development Update report revealed these findings.
The event featured a virtual address from Washington by World Bank Country Director Abdoulaye Seck, and was attended by World Bank Senior Economist Dhruba Sharma, Economist Nazmus Khan, and Senior Communications Officer Meherin A Mahbub.
The report highlights that Bangladesh's economy is currently facing several challenges, including high inflation, external sector pressures, financial sector weaknesses, and political uncertainty, all of which are expected to keep growth limited.
World Bank further identified a significant challenge in job creation within Bangladesh's formal sector, noting that 84.9% of employment remains in the informal sector—a strikingly high figure. From 2016 to 2022, employment in the manufacturing sector has declined by 9.6%.
Regarding the financial sector, the report pointed to the ongoing crisis within the banking sector, particularly the persistently high level of non-performing loans, which the government has been unable to control despite various efforts.
In addition, Bangladesh Bank has increased interest rates in an attempt to curb inflation, resulting in a reduction in private sector borrowing.
World Bank expects Bangladesh's growth to slow, ranging between 3.2% and 5.2%, with a midpoint projection of 4%.
Earlier in April, the World Bank had forecasted a 5.7% growth for the 2024-25 fiscal year. The recently ousted Awami League government had set a target of 6.75% growth for the ongoing fiscal year, but the World Bank’s forecast now falls short of that by 2.75%.
If realised, this would mark the lowest growth since the COVID-19 pandemic, when Bangladesh saw a 3.45% GDP increase in the 2019-20 fiscal year.
In addition to lowering its forecast for the current fiscal year, the World Bank has revised its projection for the 2023-24 fiscal year down to 5.2%, compared to the government's provisional estimate of 5.82%.
The report also touched upon the mismatch between demand and supply in Bangladesh's labour market, describing it as a major issue.
It underscored the need for export diversification, increased foreign investment, and improved education standards, particularly in technical fields. Special emphasis was placed on addressing these challenges to increase formal sector employment. The report also noted that domestic revenue collection remains poor.
Abdoulaye Seck emphasised that in recent years, Bangladesh’s economic growth has not significantly contributed to job creation, despite the large number of young people entering the workforce annually. He particularly pointed to the rising number of educated and urban unemployed individuals as a key challenge.
He added that high inflation, particularly food inflation, is one of the most pressing challenges for Bangladesh, as it has continued to erode living standards despite various initiatives.
Moreover, rising inequality in the country was noted, with Seck stressing the need for reforms to promote inclusive growth and reduce disparities, alongside rapid reforms in the financial sector.
