Bangladesh has critical window to turn demographic change into opportunity

South Asia has an opportunity to capitalize on a working-age population that numbers 1.17 billion people, but this window is gradually closing. Bangladesh has around two decades before its working-age population share peaks in 2045. While this offers Bangladesh more time than most South Asian economies to capture the demographic dividend, structural challenges demand urgent attention, says the World Bank report, Demographic Change in South Asia: From Tailwinds to Headwinds for Development, released today. 

In less than a decade, South Asia’s working-age population will peak and start shrinking. By 2049, it will be an aged regional economy with 14% of its population aged 65 and older. Bangladesh is projected to reach aged status in 2051.

Since 2000, a growing share of adults in their prime working years has helped expand South Asia’s GDP by 0.4 percent and raise its labor productivity by 1.1 percent per year.  South Asia’s transition from an aging to an aged population is proceeding at a faster pace and at a lower level of income per capita than in comparable emerging market and developing economies. The annual contribution of demographics to GDP growth will shrink between now and 2050, to 0.1 percent. 

“South Asian economies are aging faster and earlier in their development journeys,” said Johannes Zutt, World Bank Vice President for South Asia. “They need to act now to adopt policies and build infrastructure that create more and better jobs and deepen the gains from their ‘youth dividend’, while at the same time preparing for aging. This will enable South Asia to make the most of its large working age population and lay the foundations for a ‘second dividend’ as healthier older people continue contributing to the economy.”  

The challenge is compounded by jobs gap. Bangladesh has not fully translated its favorable age structure into jobs and productivity, constrained by limited formal job creation, low female labor-force participation, and persistent human capital gaps. About 84% of workers, roughly 58 million, are informally employed. Even a degree does not guarantee a formal job. 44% of graduates are informally employed. Formal firms add jobs slowly, and small firms have recently shed workers on average.

‘“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. ‘At the same time, the country needs to start strengthening healthcare and old age income security for an aging population. That means meeting the growing financing need for aging transition will require stronger domestic resource mobilization”.

In South Asia, health care, long-term care, and pension systems remain ill-equipped to meet the needs of a population that is living longer but not necessarily healthier.  Only 17 percent of South Asia’s working age population contribute to a pension scheme, and only 10 percent of older South Asians receive any pension benefits, the lowest coverage globally.   

The report offers a roadmap for South Asian countries to act on both fronts. They can sustain the “youth dividend” by creating more productive jobs, expanding access to finance for MSMEs, streamlining regulations, improving health, education and skills, and removing barriers to women’s employment. They can also unlock the “second dividend” through stronger healthcare, long-term care and pension systems that support people as they age, alongside greater savings and investments that raise productivity.