Bangladesh has until 2045 to capitalise on its growing working-age population before its demographic advantage peaks, but persistent employment and productivity constraints threaten to limit the economic gains, according to a new World Bank report.
The country’s working-age population is projected to peak in 2045, giving it more time than most South Asian economies to capture the demographic dividend. However, limited formal job creation, low female labour-force participation and persistent human capital gaps are preventing Bangladesh from fully translating its favourable age structure into jobs and higher productivity.
The warning comes as South Asia, home to 1.17 billion working-age people, approaches a major demographic shift. The region’s working-age population is expected to peak and begin shrinking in less than a decade.
By 2049, people aged 65 and above are projected to account for 14 per cent of South Asia’s population, making it an aged region. Bangladesh is expected to reach this stage in 2051.
The economic contribution of the region’s demographic advantage has been significant. Since 2000, the growing share of adults in their prime working years has added an average 0.4 per cent to annual GDP growth and 1.1 per cent to annual labour productivity growth.
But the annual contribution of demographic changes to GDP growth is projected to fall to 0.1 per cent between now and 2050.
South Asia is also transitioning from an ageing to an aged population faster and at a lower level of per capita income than comparable emerging market and developing economies, according to the report, “Demographic Change in South Asia: From Tailwinds to Headwinds for Development”, released on Tuesday.
“South Asian economies are ageing faster and earlier in their development journeys,” said Johannes Zutt, World Bank vice-president for South Asia.
He said countries needed to adopt policies and build infrastructure to create more and better jobs, deepen the gains from their youth dividend and prepare for population ageing.
Healthier older people could continue contributing to economic activity, helping countries secure a second demographic dividend.
Bangladesh’s employment structure illustrates the challenge. Around 84 per cent of its workers, or approximately 58 million people, are employed informally. Even higher education does not ensure formal employment, with 44 per cent of graduates working in the informal sector.
Formal firms are adding jobs slowly, while small firms have recently shed workers on average. These trends, alongside low female labour-force participation and prevalent human capital gaps, have constrained the country’s ability to benefit fully from its working-age population.
“Bangladesh’s demographic opportunity depends on what it does now: help firms create better jobs, equip young people with market-relevant skills, and remove barriers that keep women out of work,” said Jean Pesme, World Bank division director for Bangladesh and Bhutan.
He said Bangladesh also needed to strengthen healthcare and old-age income security. Meeting the growing financing needs of the ageing transition would require stronger domestic resource mobilisation.
The region’s social protection systems face substantial gaps. Healthcare, long-term care and pension arrangements remain ill-equipped to meet the needs of people living longer but not necessarily healthier lives.
Only 17 per cent of South Asia’s working-age population contributes to a pension scheme, while just 10 per cent of older people in the region receive pension benefits – the lowest coverage globally.
The World Bank recommends that countries pursue two priorities simultaneously. To sustain the youth dividend, they need to generate more productive jobs, expand access to finance for micro, small and medium-sized enterprises, streamline regulations, improve healthcare, education and skills, and remove barriers to women’s employment.
To secure a second demographic dividend, countries need stronger healthcare, long-term care and pension systems, alongside greater savings and investment to raise productivity.
For Bangladesh, the 2045 peak marks a deadline to address employment and productivity constraints while preparing for the financial and social demands of an ageing population.
