Bangladesh’s economy is expected to recover further in the coming years, with GDP projected to rise to 4.8 per cent in financial year 2025-26 and 6.3 per cent in FY27, following a rebound in the second half of FY25, according to the World Bank’s latest update.

The recovery has been driven by strong exports, record remittances, and rising foreign exchange reserves, although the report warns that urgent reforms are needed to sustain growth and create jobs, particularly for youth and women.

The World Bank in its latest update said 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.

Inflation moderated on the back of tight monetary policy, lower essential food import duties, and strong harvests. However, the fiscal deficit widened amid weak tax revenue and higher subsidies and interest payments.

It mentioned that poverty increased between 2023 and 2024, and labor force participation fell from 60.9 to 58.9 percent, with women disproportionately affected.

Of the three million additional working-age people outside the labor force, 2.4 million were women.

‘The economy has shown resilience, but this cannot be taken for granted,’ said Jean Pesme, World Bank Division Director for Bangladesh and Bhutan.

Jean Pesme said that to ensure a strong growth path and generate more and better jobs, Bangladesh needed bold reforms and faster implementation to enhance domestic revenue mobilisation, address banking sector vulnerabilities, reduce energy subsidies, plan urbanisation, 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, emphasising the need to reduce regional disparities as a means of supporting inclusive job creation nationwide.

The Bangladesh Development Update is a companion piece to the South Asia Development Update, a twice-yearly World Bank report—also launched on October 7—that examines economic developments and prospects in the South Asia region and analyzes policy challenges countries face.

The October 2025 edition titled Jobs, AI, and Trade shows growth in South Asia is projected to be robust at 6.6 percent this year—but a significant slowdown looms on the horizon. The report examines how reforms to promote trade openness and AI adoption could help the region create jobs and catalyze growth.

Johannes Zutt, World Bank Vice President for South Asia, said that South Asia had enormous economic potential and remained the fastest-growing region in the world, but that countries needed to proactively address risks to growth.

He said that countries could boost productivity, encourage private investment, and create jobs for the region’s rapidly expanding workforce by maximising the benefits of AI and lowering trade barriers, particularly for intermediate goods.

The report stated that South Asian countries ranked among the least open to international trade and finance, with high tariffs protecting sectors where employment opportunities were shrinking.

In contrast, sectors with lower tariffs, such as services, had accounted for three-quarters of employment growth over the past decade.

It suggested that carefully sequenced tariff reductions, particularly within the context of broader free trade agreements, could help boost private investment, increase competitiveness, and generate significant employment opportunities.

The report also recommended harnessing the potential of AI to raise productivity and incomes, noting that South Asia’s workforce had limited exposure to AI adoption due to the predominance of low-skill, agricultural, and manual jobs.

However, AI could deliver substantial productivity gains, particularly in sectors where it could complement human labour.

Franziska Ohnsorge, World Bank Chief Economist for South Asia, said that increasing trade openness and greater AI adoption could be transformative for the region.

She added that policy measures to facilitate the reallocation of workers across firms, activities, and locations were essential for channeling resources to productive sectors and critical for boosting investment and job creation.