Bangladesh’s poverty rate increased in FY25 while overall labor force participation declined, largely due to a sharp fall in female employment, according to the World Bank’s (WB) latest Bangladesh Development Update released on Tuesday.
The report estimates that the national poverty rate rose to 21.2% in FY25 from 20.5% in FY24, while labor force participation fell to 58.9% from 60.9%, driven primarily by a decline in female participation.
Of the three million additional working-age individuals outside the labor force, 2.4 million were women.
Despite these setbacks, the World Bank projects Bangladesh’s GDP growth to rebound to 4.8% in FY26 from 4.0% in FY25, reaching 6.3% in FY27 as stability and reforms take effect.
The report also highlighted that external pressures eased in FY25 as a market-based exchange rate was adopted, foreign exchange reserves stabilized, the current account deficit narrowed, and exports grew robustly.
It shows a current account balance surplus driven by 26.8% remittance and 8.8% export growth in FY25.
Inflation moderated on the back of tight monetary policy, lower essential food import duties, and strong harvests.
Inflation continued to exceed the wage growth rate of the low-income population; however, the gap has narrowed in recent months, WB stated.
Nazmus Sadat Khan, senior economist, World Bank, delivered the keynote presentation.
He said: “Despite the severe disruptions in the first half of FY25, GDP growth picked up in the following quarters.”
The presentation showed that private investment remained low due to political uncertainty and the high cost of doing business.
However, the fiscal deficit widened amid weak tax revenue and higher subsidies and interest payments.
The tax-to-GDP ratio is estimated to fall to 7.9% in FY25 compared to 8.3% in FY24.
Khan also said: “All these (data and findings) are still estimated.”
Jean Pesme, World Bank division director for Bangladesh and Bhutan, said: “The economy has shown resilience, but this cannot be taken for granted. To ensure a strong growth path and more and better jobs, Bangladesh needs bold reforms and faster implementation to enhance domestic revenue mobilization, banking sector vulnerabilities, reduce energy subsidies, plan urbanization, and improve the investment climate.”
Over the past two decades, Bangladesh has witnessed significant shifts in the geography of employment, population growth, and infrastructure development, with industrial jobs increasingly concentrated in Dhaka and Chattogram.
The report called for an urgent rethinking of spatial development strategies with a focus on reducing regional disparities as a way of supporting inclusive job creation nationwide.
“Bangladesh needs to adopt a new strategy that will place enhanced efficiency in the use of resources at its center and consider the needs and strengths of its diverse regions.”
South Asia Development Update
The Bangladesh Development Update is a companion piece to the South Asia Development Update, a twice-yearly World Bank report also launched that examined economic developments and prospects in the South Asia region, and analyzed policy challenges countries face.
The October 2025 edition titled Jobs, AI, and Trade showed growth in South Asia projected to be robust at 6.6% this year, but a significant slowdown looms on the horizon.
The report examined how reforms to promote trade openness and AI adoption could help the region create jobs and catalyze growth.
“South Asia has enormous economic potential and is still the fastest-growing region in the world. But countries need to proactively address risks to growth,” said Johannes Zutt, World Bank vice president for South Asia.
“Countries can boost productivity, spur private investment, and create jobs for the region’s rapidly expanding workforce by maximizing the benefits of AI and lowering trade barriers, especially for intermediate goods.”
South Asian countries rank among the least open to international trade and finance. The region’s high tariffs protect sectors where employment opportunities are shrinking.
On the other hand, sectors with lower tariffs, such as services, have accounted for three-quarters of employment growth during the past decade. Carefully sequenced tariff reductions, especially in the context of broader free trade agreements, could help boost private investment, increase competitiveness, and generate significant employment opportunities.
The report also recommends harnessing the potential of AI to boost productivity and incomes. South Asia’s workforce has limited exposure to AI adoption due to the predominance of low-skill, agricultural, and manual jobs. But AI could also bring substantial productivity gains, especially in sectors that have strong potential for AI to complement humans.
Franziska Ohnsorge, World Bank chief economist for South Asia, said: “Increasing trade openness and growing adoption of AI could be transformative for South Asia. Policy measures to facilitate the reallocation of workers across firms, activities, and locations can help channel resources to productive sectors and are critical for boosting investment and job creation in the region.”
