Human capital gap weighs on Bangladesh economy

Bangladesh scored 147 out of 325 in the Human Capital Index Plus (HCI+), ranking below both the South Asian average of 157 and the lower-middle-income country average of 153, according to the World Bank’s Human Capital Country Brief, released on Sunday.

The HCI+ measures the knowledge, skills, health, education and work experience people are expected to accumulate over their working lives, reflecting a country’s ability to develop productive human capital.

The report identifies human capital as a key driver of long-term economic growth, estimating that every 10-point increase in Bangladesh’s HCI+ score could raise future income by around 10 per cent. It also suggests that narrowing the country’s human capital gap with better-performing economies of similar income levels could increase future income by as much as 67 per cent.

Bangladesh recorded mixed results across the index’s three pillars. It scored 42 in health, slightly above the South Asian average of 39, and 27 in employment, exceeding the regional average of 23. However, its education score stood at 77, well below the regional average of 95, underscoring persistent weaknesses in educational attainment and learning outcomes.

Comparing Bangladesh with the Philippines, which achieved an HCI+ score of 175, the report identifies low tertiary education completion, weaker adult employment participation and poorer learning outcomes as the main factors behind Bangladesh’s lower ranking. Raising these indicators to Philippine levels could lift Bangladesh’s score to 173, increasing future income by an estimated 26.7 per cent.

The report also highlights a significant gender gap. Women scored 127, compared with 168 for men, indicating that women’s future earning potential is projected to be 41 per cent lower because of disparities in human capital accumulation.

The World Bank stresses the need for greater investment in education, skills development and gender equality to strengthen long-term economic prospects.

Meanwhile, another World Bank report, South Asia Economic Update: Working with Industrial Policy (April 2026), notes that Bangladesh’s economy continues to feel the effects of the political unrest of late 2024.

GDP growth slowed to 4.5 per cent in the first quarter of fiscal year 2025-26, while external trade has come under pressure following higher US import tariffs and increased competition from diverted exports. Ready-made garment exports fell sharply between September and December after an earlier surge in advance shipments.

Although inflation has eased from its late-2024 peak, it remained at 9.1 per cent in February, well above the Bangladesh Bank’s 6-7 per cent target. The central bank has therefore kept its policy interest rate at 10 per cent, the highest in about 15 years.

The banking sector also remains under severe strain. Official non-performing loans exceed 30 per cent, and banks have recorded losses for the first time since the COVID-19 pandemic.

High borrowing costs and financial sector weaknesses have constrained private investment, while tax revenue remains below 9 per cent of GDP, limiting the government’s capacity to finance development and economic reforms.