DHAKA, October 10, 2019: The Bangladesh economy sustains strong growth in FY19 led by rising exports and record remittances, says a new World Bank report, “Bangladesh Development Update October 2019: Tertiary Education and Job Skills,” launched today.
Remittances grew by 9.8 percent, reaching a record $16.4 billion in FY19. The contribution of net export growth was positive, supported by a diversion of garment export orders from China and a decline in imports. Agricultural and pharmaceutical exports led non-RMG export growth. However, leather and leather product exports declined by 6 percent.
Net foreign direct investment (FDI) increased by 42.9 percent from a low baseline with investments in the power, food, and textile sectors. Private consumption grew by 5.4 percent. Private sector credit growth was weak and bank liquidity remains constrained. Non-performing loans continued to rise in the banking sector.
The report warns about an uncertain global outlook and domestic risks in the financial sector. Exchange rate appreciation is also a challenge for Bangladesh’s trade competitiveness. Reforms in the financial sector, including revenue mobilization and doing business, will be essential for progress. The report also urges closing the infrastructure gap and timely implementation of the Annual Development Plan.
“Bangladesh’s economy is projected to maintain strong growth backed by sound macroeconomic fundamentals and progress in structural reforms,” said Mercy Miyang Tembon, World Bank Country Director for Bangladesh and Bhutan. “To achieve its growth vision, Bangladesh will need a high-productivity economy. Human capital development that is responsive to labor market demand for higher-level skills and to rapid technological advancements will be crucial.”
Bangladesh needs to create quality jobs for about two million young people entering the labor force every year. To harness the benefits of this growing labor supply, investments in human capital are required. The country needs to invest significantly in teaching, learning and ICT facilities, among other areas, to create a competitive workforce.
Higher labor productivity will be essential to diversify the economy beyond garment exports and remittances. Growing sectors—such as export-oriented manufacturing, light engineering, shipbuilding, agribusiness, information and communication technology (ICT), and pharmaceuticals—will require skilled professionals in managerial, technical, and leadership positions.
Tertiary graduates struggle to find jobs, indicating a major skills gap. Only 19 percent of college graduates are employed full-time or part-time. At the tertiary level, more than a third of graduates remain unemployed one or two years after graduation, while unemployment rates of female graduates are even higher.
“Labor market surveys repeatedly show that employers struggle to fill high-skill positions such as technicians and managers,” said Bernard Haven, World Bank Senior Economist, and co-author of the report. “To bridge the demand and supply gap, investments in skills training, equitable access for female and poor students, public funding mechanisms to develop market-relevant skills and an effective regulatory and accountability framework are needed.”
Background: The World Bank is among the first development partners to support Bangladesh following its Independence. Bangladesh currently has the largest IDA program of over $12 billion. Since Independence, the World Bank has committed more than $30 billion in grants, interest-free, and concessional credits to the country.