Bangladesh needs to create better jobs especially in urban areas to ensure sustainable growth for a better future.
For creation of jobs, there is a need to mitigate the disparity in demand and supply, education system reform, better business environment; more opportunity for new firms, export diversification, and more foreign direct investment (FDI).
The World Bank made the recommendations in its latest report titled “Bangladesh Development Update October 2024,” launched at its regional office in Dhaka on Tuesday. World Bank Senior External Affairs Officer Mehrin Ahmed Mahbub moderated the event.
The global lender also recommended that critical reforms are also needed to strengthen transparency, accountability, and improve public service delivery.
It projected 4 per cent GDP growth for Bangladesh during the current financial year, while estimating 5.2 per cent for FY24. Bangladesh Bureau of Statistics (BBS) had projected 5.8 per cent for FY24 in May this year with the seven months of economic performance calculating.
The World Bank highlighted the main macro fiscal challenges are high inflation, financial sector vulnerabilities and external sector pressure. Inflation will be declined to 9 per cent for FY25 and it also further down grate to 7.5 per cent in FY26.
Need better jobs
According to the Bangladesh Development Update, despite the overall unemployment rate declining between 2016 and 2022, young people face significantly higher unemployment rates, particularly in urban areas.
The availability of jobs has declined for urban educated youth, and job creation in large industries, like the ready-made garments sector, has stagnated. Since 2016, while more jobs were created in Dhaka, three divisions – Chattogram, Rajshahi, and Sylhet – faced significant net employment losses.
“In recent years, Bangladesh’s growth has not translated into job creation for the large number of youths entering the job market every year. Particularly, the educated youth and women faced difficulty in getting jobs to fulfill their aspirations,” said Abdoulaye Seck, World Bank country director for Bangladesh and Bhutan, who attended the launching event virtually.
“But time and again, Bangladesh has shown extraordinary resilience and determination in the face of adversity. I am confident that with urgent and bold reforms to enhance economic and financial governance, improve business environment, Bangladesh can return to a strong and inclusive growth path, with millions of jobs for its youth,” the regional head added.
The World Bank mentioned that tackling the challenges related to the job market in Bangladesh requires a comprehensive and coordinated policy approach like three p-production, people and places.
Production policies should address labour demand constraints by removing barriers to private sector growth and productivity.
Policies should target labour supply constraints by investing in skills and human capital. Places policies should address labor market frictions and limited market access that hinder efficient labor reallocation.
In response to journalists pointing out that many businesses are concerned about the law and order situation in Bangladesh, World Bank Senior Economist and Co-author of the report Dhruv Sharma said, “The situation has improved a lot in the last two months.
“It is expected that there will be more improvement in the coming days.”
Marco economic indicators
Inflation, driven by high food and energy prices, averaged 9.7 per cent in FY24. Inflation spiked in the month of July and moderated in August.
It is expected to remain elevated in the near term, but gradually subside in the medium term if supply-side issues stabilise and prudent monetary and fiscal policies are maintained, said the World Bank report.
The fiscal deficit is estimated to have moderated marginally to 4.5 per cent of GDP in FY24 and is expected to remain within the government's target of 4.3 per cent of GDP in FY25, with fiscal space for productive expenditures increasing only gradually.
The implementation of the Annual Development plan declined to 80.9 per cent in FY24 compared to 85.2 per cent in FY23.
According to the Implementation Monitoring and Evaluation Division (IMED) during July-August ADP implementation was 2.57 per cent, which was lowest among the last five years compared to the same period.
About the current account deficit the report mentioned it narrowed to $6.5 billion in FY24, thanks to a contraction in imports and robust remittances. Remittances declined in July due to disruptions but rebounded. The balance of payments deficit also improved.
“Pressure on the external sector is expected to persist in FY25, easing later if global conditions improve and exchange rate flexibility increases,” said Dhruv Sharma, World Bank Senior Economist.
About the revision of export data the economist mentioned, export data revision has affected the balance of payment. This move reflected more transparency on trade data and looking at the international benchmark.
The World Bank mentioned that in May 2024, the Bangladesh Bank implemented a crawling peg exchange rate system as a step towards a market driven exchange rate system. This led to a narrowing in the gap between the formal and informal exchange rates.
While the banking sector faces tight liquidity conditions and elevated non-performing loans, the Bangladesh Bank has made restoring discipline and stability in the sector a priority alongside managing inflation, said the global lender in its latest report.
