Bangladesh to Become an ‘Aging Economy’ by 2051, World Bank Warns of Youth Burden

South Asia now has a huge demographic chance, with 1.17 billion people of working age. But if the region is slow to take the steps needed to raise jobs and productivity, it may lose this chance. There is even a risk that the large young population becomes a burden instead of an economic asset. A new World Bank report gives this warning.

According to the report, the share of working age people will reach its peak in most South Asian countries by 2049. In Bangladesh, this will happen in 2051. So Bangladesh will get a little more time than most South Asian countries to use its demographic dividend. Still, it must act now to create jobs and tackle structural challenges.

The World Bank released the report, titled “Demographic Change in South Asia: From Tailwinds to Headwinds for Development”, at its Dhaka office yesterday. The report says the working age population of South Asia will reach its peak and start to fall in less than a decade. By 2049, the region will become an “aged economy”. People aged 65 or above will then make up 14 percent of the population. For Bangladesh, this stage will come in 2051.

The World Bank says population ageing in South Asia is moving much faster than in developed countries. Also, the countries face this change while their income per person is still low. The report says that since 2000, the working age population has helped raise South Asia’s GDP by 0.4 percent a year and labour productivity by 1.1 percent. By 2050, however, this yearly gain to growth will shrink to just 0.1 percent.

World Bank Vice President for South Asia Mr. Johannes Zutt said South Asian economies are ageing faster and at a lower income level. He said the region must act now with policies and infrastructure that create more and better jobs. This will raise the gains from the youth dividend and also prepare the region for old age.

The report says Bangladesh has a favourable age structure, but it has not fully used it to raise jobs and productivity. It names limited formal job creation, low participation of women in the workforce and gaps in human capital as the main causes. According to the World Bank, about 84 percent of workers in Bangladesh, or 58 million people, now work in the informal sector. It is worrying that 44 percent of graduates also work in the informal sector, even after higher studies.

Formal firms are creating jobs only slowly. Recently, many small firms have also had to cut workers. World Bank Division Director for Bangladesh and Bhutan Mr. Jean Pesme said Bangladesh’s use of its demographic chance now depends on what steps the country takes. He said it is vital to help firms create good jobs, give young people skills that suit the labour market and remove the barriers to women’s work. He added that the country must also start to prepare health care and income security for the elderly.

World Bank’s worries at the press conference

World Bank officials answered many questions at the press conference held to launch the report. Asked whether the demographic dividend could turn into an economic burden if people cannot find jobs, they said this is now the main worry. Citing the experience of East Asian countries, they said it is not enough to have a young population or to give them education and skills. As government jobs are limited, the private sector must create most of the jobs. For this, it is vital to create a good climate for private firms to grow and run.

On the low productivity of the informal sector, the officials said informal work was not as strong in Western and East Asian economies when they went through such change. So it is not possible to make the informal sector formal overnight by forcing rules or limits on it. Instead, the government must work with this sector, give incentives and remove its obstacles. On falling fertility rates, they said global experience shows that once fertility starts to fall, it usually does not go back up. They added that pilot projects around the world that try to raise fertility with money or incentives have not worked.

The report sets out a few steps for South Asian countries. These include raising productive jobs, easing finance for small and medium firms, and simplifying rules. It also stresses using the potential of young people by improving health, education and skills. The report says strong health care, long term care and pension systems can bring economic gains from ageing too. It calls this the “second demographic dividend”. Such systems can improve the lives of older people and also help them save more.