Investment slows amid political uncertainty

The World Bank has identified four major challenges still weighing on Bangladesh’s economy: sluggish private investment, stagnant employment, a banking sector burdened by high non-performing loans, and declining revenue collection.

In its Bangladesh Development Update – October 2025 Edition, the World Bank said strong and timely reforms are essential to sustain inclusive growth. It emphasised that reforms are critical for maintaining economic expansion and employment.

The report was released at a press briefing held at the World Bank’s Dhaka office on Tuesday.

Jean Pascal Pesme, WB’s Country Director for Bangladesh and Bhutan, and economist Nazmus Sadat Khan presented the findings.

Pesme noted that Bangladesh’s economy has shown resilience in recent times. According to him, bold reforms and swift implementation are vital for sustainable growth and quality employment. 

Priority areas include expanding revenue collection, strengthening the banking sector, reducing energy subsidies, improving urban planning, and enhancing the investment climate.

The World Bank projected Bangladesh’s GDP growth at 4.8 per cent for the current 2025–26 fiscal year. If ongoing reforms are implemented effectively, growth could rebound to 6.3 per cent in the next fiscal year.

Earlier, the Asian Development Bank (ADB) forecasted 5 per cent growth for FY2025–26, while the government set a target of 5.5 per cent.

The World Bank observed that political uncertainty and high business costs continue to deter private investment. Private investment has been stagnant for several years, hovering around 23–24 per cent of GDP. Businesses cite high startup costs, unstable tax policies, and energy shortages as major obstacles to investment.

Although inflation has slightly eased in recent months, it remains high—8.3 per cent in August 2025. The World Bank said rising prices have increased poverty and reduced employment opportunities. 

The World Bank has reported a rise in poverty within just one year. In the 2023–24 fiscal, Bangladesh’s poverty rate stood at 20.5 per cent; by 2024–25, it increased to 21.2 per cent. The report also noted a decline in labour force participation among both men and women.

According to the World Bank, three million working-age men and women have dropped out of the labour force. Of them, 2.4 million are women—neither seeking jobs nor enrolled in education or training. The report classifies them as “inactive.”

Data from the Bangladesh Bureau of Statistics (BBS) shows that around 2.7 million people are currently unemployed, meaning they are unable to work even one paid hour per week. Additionally, 8.5 million youth aged 15 to 29 are neither employed nor pursuing education or training.

A recent study by the Power and Participation Research Centre (PPRC) estimated Bangladesh’s current poverty rate at 27.93 per cent, up sharply from 18.7 per cent in 2022 based on government figures.

The World Bank said Bangladesh’s economy showed recovery in the latter half of the last fiscal year, driven by export growth, record remittance inflows, and rising foreign exchange reserves, all contributing to GDP performance.

The Bangladesh Development Update projected that the country’s medium-term growth trajectory will likely remain positive but stressed that reforms are essential to sustain growth and employment.

External pressures have somewhat eased due to the market-based exchange rate, stabilised reserves, narrower current account deficit, and export expansion. Inflation has declined slightly, aided by a tight monetary policy, lower tariffs on essential goods, and good harvests. However, weak tax collection, growing subsidies, and higher interest payments have expanded the fiscal deficit.

By March 2025, the share of non-performing loans (NPLs) in the banking sector stood at 24.1 per cent, the World Bank said, far above international standards.

The World Bank observed significant geographic changes in employment, population growth, and infrastructure development over the past two decades. It noted that industrial employment has become increasingly concentrated in Dhaka and Chattogram, warning that this trend could deepen regional inequality.

The report recommended formulating a special regional development strategy to reduce disparities and promote inclusive employment across the country.

Jean Pascal Pesme, the World Bank’s Country Director for Bangladesh and Bhutan, said Bangladesh should begin preparing for the challenges that will follow its graduation from Least Developed Country (LDC) status.

He emphasised the need to strengthen the private sector, build greater negotiation capacity as global trade increasingly moves toward bilateral agreements, and encourage long-term investment through the capital market instead of relying solely on the banking sector.