Bangladesh's economic recovery remains sluggish as high inflation, a balance of payments deficit, and persistent financial sector challenges dampen progress, according to the World Bank's latest Bangladesh Development Update. The report underscores a slowdown in real GDP growth to 5.2% in FY24, primarily due to weaker consumption and exports, with further deceleration projected at 4.0% in FY25. A recovery to 5.5% is anticipated in FY26,Indian state owned DD News reported.

The World Bank highlighted that the nation’s growth has not sufficiently generated jobs, especially for its youth, women, and educated workforce. Bangladesh and Bhutan Country Director Abdoulaye Seck observed that many young people, particularly those with higher education, are unable to find employment that aligns with their qualifications, a trend that disproportionately affects women. Bangladesh's Gini index—a gauge of income inequality—rose from 0.50 in 2010 to 0.53 in 2022, signalling deepening inequality, especially in urban centres.

Despite a slight drop in the overall unemployment rate from 2016 to 2022, the report emphasises that educated youth in urban areas continue to face high joblessness, with significant net job losses in Chattogram, Rajshahi, and Sylhet. Inflation averaged 9.7% in FY24, driven by food and energy costs, and although a spike in July eased slightly in August, it is expected to remain high in the short term. The World Bank believes inflationary pressures could stabilise with prudent policy measures and reduced supply disruptions. The fiscal deficit showed a modest improvement, narrowing to 4.5% of GDP in FY24, and is forecasted to stay within the government's target of 4.3% for FY25. However, fiscal space for development spending is likely to expand only gradually, with the implementation rate of the Annual Development Plan slipping to 80.9%, down from 85.2% in FY23.

Bangladesh’s external sector saw some reprieve, with the current account deficit narrowing to $6.5bn in FY24, aided by reduced imports and robust remittances. The introduction of a crawling peg exchange rate system by Bangladesh Bank in May 2024 has helped narrow the gap between official and informal exchange rates, stabilising the external balance. However, World Bank Senior Economist Dhruv Sharma warns that external pressures will persist unless global conditions improve and exchange rate flexibility increases. The financial sector remains under stress, with liquidity issues and high levels of non-performing loans. Bangladesh Bank continues to focus on stabilising the sector while addressing inflation. The report calls for urgent reforms to enhance productivity and foster inclusive growth.