Bangladesh’s economy showed signs of recovery in the second half of fiscal year 2025 after experiencing disruptions earlier in the year, according to a new update from the World Bank. The rebound was supported by strong export performance, record levels of remittances, and an increase in foreign exchange reserves.
The Bangladesh Development Update, released on October 7, 2025, projects that the country will continue on a path of growth in the medium term. Gross domestic product is expected to grow from 4.0 percent in FY25 to 4.8 percent in FY26 and reach 6.3 percent in FY27. However, the report stresses that urgent reforms are needed to maintain this momentum and support job creation, particularly for young people and women.
External pressures on the economy eased during FY25 as Bangladesh adopted a market-based exchange rate, stabilized its foreign exchange reserves, narrowed its current account deficit, and saw robust export growth. Inflation declined due to tight monetary policy, reduced import duties on essential foods, and strong agricultural harvests. Despite these improvements, the fiscal deficit widened because of weak tax revenues and increased spending on subsidies and interest payments.
The report notes an increase in poverty between 2023 and 2024, with labor force participation falling from 60.9 percent to 58.9 percent. Women were disproportionately affected: out of 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. “To ensure a strong growth path and more and better jobs, Bangladesh needs bold reforms and faster implementation to address enhance domestic revenue mobilization, banking sector vulnerabilities, reduce energy subsidies, plan urbanization, and improve the investment climate.”
Over the last twenty years, Bangladesh has experienced significant changes in employment patterns, population growth, and infrastructure development. Industrial jobs have become increasingly concentrated in Dhaka and Chattogram. The report calls for a reassessment of spatial development strategies to reduce regional disparities as a means of supporting inclusive job creation across the country.
The Bangladesh Development Update is released alongside the South Asia Development Update—a twice-yearly World Bank publication that reviews economic trends across South Asia. The October 2025 edition is titled "Jobs, AI, and Trade" and projects that regional growth will remain robust at 6.6 percent this year but warns of potential slowdowns ahead. It discusses how reforms aimed at increasing trade openness and adopting artificial intelligence could help generate jobs and stimulate further 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.”
According to the report, South Asian countries have some of the highest tariffs globally—these protect sectors where job opportunities are declining while sectors with lower tariffs like services have driven most employment gains over the past decade. Reducing tariffs through broader free trade agreements could attract private investment and generate new employment opportunities.
The update also highlights artificial intelligence as an opportunity for raising productivity even though most workers in South Asia currently have limited exposure due to prevalent low-skill jobs in agriculture or manual labor sectors.
“Increasing trade openness and growing adoption of AI could be transformative for South Asia,” said Franziska Ohnsorge, World Bank Chief Economist 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.”
More information can be found by downloading the full report: Bangladesh Development Update: Urbanization as a Pathway to Boost Job Growth.