Bangladesh’s economic growth is expected to grow 4 per cent in the financial year 2024-25 due to the political uncertainties and impact of flood, According to a World Bank report.

The latest South Asia Development Update from the World Bank, released on Thursday, indicates that output growth in Bangladesh is projected to decline from 5.2 percent in FY24 to a range of 3.2–5.2 percent, with a mid-point of 4.0 percent in FY25, reflecting significant uncertainties arising from recent political turmoil.

‘In the short term, political uncertainties are expected to keep investment and industrial growth subdued. Recent floods are expected to set back agricultural production modestly,’ the report read.

However, in the medium to long term, growth is anticipated to gradually improve, supported by crucial reforms in the financial sector, enhanced domestic resource mobilisation, a better business climate, and increased trade.

According to the report, growth in South Asia is expected to rise to 6.4 percent this year, surpassing earlier projections and positioning the region to be the fastest-growing in the world.

Unlocking untapped potential by increasing women’s participation in the labour force and further opening up to global trade and investment could enable the region to grow even faster and achieve its development goals, said the World Bank in its twice-yearly regional outlook.

The report predicted a broad-based upturn in the region, driven by strong domestic demand in India and quicker recoveries in most other South Asian countries. Growth is expected to remain robust at 6.2 percent per year for the next two years.

However, this forecast faces downside risks, including extreme weather, debt distress, and social unrest.

Policy missteps, such as delays in planned reforms, could also hinder the region’s progress. Additionally, fragile fiscal and external positions provide little buffer against these risks, it said.

South Asia’s outlook is undoubtedly promising, but the region could do more to realize its full economic potential, said Martin Raiser, World Bank Vice President for South Asia.

‘Key policy reforms to integrate more women into the workforce and remove barriers to global investment and trade can accelerate growth. Our research shows that raising female labor force participation rates in the region to those of men would increase regional GDP by up to 51 percent,’ he said.

Female labour force participation in South Asia is among the lowest in the world, with only 32 percent of working-age women engaged in the labour force in 2023, compared to 77 percent of working-age men in the region, the report mentioned.

It said that for all South Asian countries except Bhutan, female labor force participation rates in 2023 were 5 to 25 percentage points lower than in countries at similar levels of development.

This shortfall in the female labor force is most pronounced after marriage. On average, once married, women in South Asia reduce their participation in the workforce by 12 percentage points, even before they have children, the WB report said.

‘South Asia’s female labor force participation rate of 32 percent is well below the 54 percent average in emerging market and developing economies,” said Franziska Ohnsorge, World Bank Chief Economist for South Asia.

The report’s recommendations included legal reforms to improve gender equality, measures to accelerate job creation, and the removal of barriers to women working outside the home, such as the lack of safe transport and quality child and elder care.

Another key area of reform was increasing trade openness. Most countries in South Asia ranked among the least open to global trade and investment, greatly limiting the region’s ability to take advantage of the reshaping of global supply chains.

Within the region, greater export orientation had been linked to increased female employment. Therefore, increased openness could have helped the region spur growth as well as boost job creation, especially for women, the report mentioned.