Time running out to reap demographic dividend

Bangladesh has a narrowing window to turn its favourable population structure into sustainable economic growth, as its demographic dividend is expected to peak around 2045 before the country moves rapidly towards an ageing society, a new World Bank study has warned.

The study cautions that Bangladesh has less than two decades to create productive employment, improve workforce skills and increase labour force participation before demographic changes begin to weigh on economic growth.

At the same time, the country must prepare for rising healthcare costs, inadequate pension coverage and growing demand for elderly care.

Titled Demographic Change in South Asia: From Tailwinds to Headwinds for Development,
the report was launched at the Pan Pacific Sonargaon Hotel in Dhaka on Tuesday (3 November).

Presenting the keynote address, Franziska Lieselotte Ohnsorge, World Bank chief economist for Asia, said Bangladesh’s working-age population share was still rising and was expected to reach its peak around 2045, roughly a decade later than the South Asian average.

This extended demographic window offers an opportunity to accelerate economic growth through job creation, skills development and greater participation in the labour market.

However, the country is projected to enter the category of an ageing society in 2027, when people aged 65 and above will account for 7 per cent of the population.

Their share is expected to double to 14 per cent by 2051, marking Bangladesh’s transition to an aged society.

The speed of this transition is particularly concerning. The same shift took 72 years in the United States and 126 years in France, leaving Bangladesh considerably less time to prepare its economy and institutions.

Dividend Losing Momentum
Changes in Bangladesh’s age structure contributed around 0.4 percentage points annually to per capita GDP growth between 2000 and 2024, according to the report.

However, this contribution is projected to fall to 0.2 percentage points annually during 2025-2044 before turning negative from 2045.

The report also warns that Bangladesh will reach major ageing milestones at significantly lower income levels than countries that have already experienced similar demographic transitions.

Its per capita income is expected to remain well below the average for emerging market and developing economies, potentially limiting the government’s capacity to finance social protection and healthcare for older people.

Weak Financial Protection
Financial security among the elderly remains fragile because of limited pension coverage, inadequate social protection and high healthcare costs.

Illustrative figures from 2018 cited in the report show that only 3 per cent of Bangladeshi adults saved specifically for old age. Although social pensions cover around half of the elderly population, the benefits are insufficient to ensure adequate financial security.

Healthcare expenses add to the burden, with out-of-pocket payments accounting for around 79 per cent of total health expenditure, one of the highest proportions among the countries examined.

The government’s limited revenue mobilisation capacity further restricts its ability to expand support.

Bangladesh’s tax revenue is approximately half the average for emerging market and developing economies, leaving little fiscal room for increased spending on old-age protection.

Jobs and Skills Gap
Labour market weaknesses also threaten the country’s ability to reap the full benefits of its demographic dividend.

Although employment among Bangladesh’s working-age population is higher than the South Asian average, it remains below the level in other emerging market and developing economies.

The gap is particularly significant for women and in non-agricultural employment.

Around 84 per cent of the country’s workforce is employed informally, leaving a large proportion of workers without adequate job security, social protection or retirement benefits.

The report also identifies poor educational outcomes and inadequate skills development as major barriers to productive employment. Around 51 per cent of 10-year-old children cannot read and understand a simple text, a condition known as learning poverty.

Without substantial improvements in education and skills, many future workers may struggle to secure productive employment and build financial security.

Ageing Economy
An ageing population could create new business opportunities in healthcare, elderly care and other services catering to older consumers, collectively known as the silver economy.
However, Bangladesh faces significant healthcare challenges.

The gap between life expectancy and healthy life expectancy is around 10 years, meaning many people spend a considerable part of their later lives coping with illness and physical limitations.

Labour force participation also drops sharply with age, falling to around 1 per cent among people aged 65 and above, largely because of health-related constraints.

The World Bank stresses the need to strengthen healthcare services, prevent non-communicable diseases and expand elderly care facilities so that people can remain healthy and economically active for longer.

Policy Priorities
The report recommends pursuing two priorities simultaneously: maximising the remaining demographic dividend and preparing the country’s institutions for an ageing population.

These require creating more productive jobs, increasing women’s participation in the workforce, improving education and skills, strengthening healthcare and harnessing emerging technologies, including artificial intelligence.

Bangladesh also needs stronger pension and social protection systems, better long-term care services and policies that encourage healthy ageing and extend productive working lives.

The report highlights early childhood nutrition and development, labour mobility, effective social protection and stronger fiscal capacity to mobilise public and private financing as other important priorities.

With its demographic window expected to peak around 2045 and the transition to an aged society projected by 2051, Bangladesh has a limited opportunity to convert its favourable population structure into lasting economic gains while building the financial and healthcare systems needed to support an older population.