Reviving and reconnecting economic growth and employment in Bangladesh

Bangladesh is currently navigating a complex economic transition marked by high inflation, declining foreign exchange reserves, vulnerabilities in the financial sector and the impending graduation from Least Developed Country status in 2026. The labour market also faces persistent and deep-seated challenges of underemployment and informality, reflected in a reversal of structural transformation. This is evident in the growing share of employment in agriculture, a surge in self-employment, declining paid employment and falling real wages. These challenges are particularly pronounced for the youth and women. Restoring macroeconomic stability to revive growth and private investment is widely recognised as a policy priority. It is also believed that faster economic growth will translate into lower unemployment and expanded opportunities for productive employment. However, analysis in this paper, drawing on the most recent Labour Force Surveys (2016-17, 2022, 2023 and 2024) and situating labour market outcomes within the broader macroeconomic context, shows that the relationship between economic growth and employment has been weak in Bangladesh, particularly between 2016-17 and 2022. This underscores the fact that employment growth cannot be treated simply as a by-product or residual outcome of the growth process. The challenge for Bangladesh, therefore is not just one of reviving economic growth but also reconnecting growth and employment and ensuring growth is job-rich. To this end, the paper also explores a set of policy options that could stimulate growth and job creation in the short and medium term. More fundamentally, however, employment considerations need to be fully integrated into the broader macroeconomic and structural reform agenda and addressed through a comprehensive and coordinated framework that aligns macroeconomic, sectoral and labour market policies.