Bangladesh's fight against poverty slows: What new World Bank report finds
Job creation key to equality and faster poverty reduction
Bangladesh reduced poverty significantly between 2010 and 2022, lifting 34 million people out of poverty while improving living standards and access to essential services such as electricity, education, and sanitation, but since 2016, the pace of poverty reduction has slowed and economic growth has become less inclusive, says a new World Bank report launched Tuesday.
The report, Bangladesh Poverty and Equity Assessment 2025, finds that extreme poverty fell from 12.2% to 5.6% and moderate poverty dropped from 37.1% to 18.7% from 2010 to 2022. Yet, nearly 62 million people – about one-third of the population – remain vulnerable to falling back into poverty if faced with an illness, natural disaster, or other unexpected shock.
According to the report, after 2016, Bangladesh's economic growth pattern shifted, becoming less inclusive, and income inequality rose as income growth benefited wealthier families more. Rural areas led poverty reduction with agriculture as a key driver. But the rate of poverty reduction was much slower in urban areas. By 2022, one in four poor Bangladeshis lived in a city.
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"For years, Bangladesh has been known for its success in poverty reduction. But with a changing global context, severe climate vulnerabilities, and a slower rate of job creation, labour income has weakened," said Jean Pesme, World Bank Division director for Bangladesh and Bhutan.
"A business-as-usual approach will not accelerate poverty reduction. The fastest path to reducing poverty and ensuring the dignity of people is through job creation, particularly for youth, women, and vulnerable populations. A pro-poor, climate-resilient, and job-centric strategy will be essential to ensure inclusive and sustainable growth."
Here's what the report says.
Poverty fell – but not fast enough
Between 2010 and 2022, Bangladesh cut extreme poverty by more than half. Moderate poverty also dropped sharply, lifting nearly 9 million and 25 million Bangladeshi people out of extreme and moderate poverty, respectively.
But after 2016, the pace of improvement slowed dramatically. Economic growth continued at an impressive rate – averaging 6.6% a year – yet it lifted fewer people out of poverty than in previous years.
The report finds that consumption growth between 2010 and 2016 was pro-poor, favouring those in the bottom 40% of the consumption distribution, although gains tilted towards wealthier households in the latter half of the period (2016 to 2022).
Also, poverty continued to decline, albeit at a slower rate (1.8 percentage points annually between 2010 and 2016, then 1.3 points between 2016 and 2022). By 2022, less than one in five Bangladeshis, or 31 million people, lived in poverty, and only 6% (9.3 million people) remained in extreme poverty.
One statistic tells the story: For every 1% of GDP growth, Bangladesh reduced poverty by just 0.9%, far lower than the South Asian average of 1.5%. In other words, growth was happening, but the benefits weren't reaching the poorest.
Millions still living on the edge
Despite the gains, vulnerability remains widespread. Over one-third of 170 million Bangladeshis are at risk of slipping back into poverty, the WB report warns.
By 2025, an estimated 36 million people are still poor, while many more hover just above the poverty line – highly exposed to inflation, job losses, illness, or climate shocks.
A rural-urban divide emerges
The pattern of poverty reduction has also shifted.
After 2016, rural Bangladesh pulled ahead, thanks largely to a rebound in agriculture. Rural inequality even dipped slightly.
According to the report, poverty became more urbanised due to rapid poverty reduction in rural areas and accelerated urbanisation. Between 2016 and 2022, poverty declined at a faster pace in rural areas (-8.5 percentage points) than in urban areas (-4.6 percentage points). This was because rural consumption growth was larger and more pro-poor.
From 2016 to 2022, renewed agricultural growth, weaker industry, and stronger job creation highlighted sharp urban-rural contrasts in poverty reduction. Agriculture experienced an annual growth-rate increase of 1.4 percentage points during this period, while industry and services slowed by 1.1 and 0.2 percentage points, respectively.
This shift underscored agriculture's continued importance in the labour market – representing 45.3% of total employment in 2022 and nearly 80% of net employment during this period. Thus, agricultural households accounted for half of the decline in rural poverty. This marks a sharp reversal from the period 2010 to 2016, when agricultural households contributed only 30% to poverty reduction, while industry and services together explained the largest share (58%). In contrast, from 2016 to 2022, the contribution of industry and services fell to 46%, with services alone decreasing by five percentage points.
The stronger role of agriculture was likely driven by a combination of increased productivity and profitability in the farm sector. Consequently, rural employment grew at an average annual rate of 2.3%, equivalent to 1.4 million new jobs per year, compared to 0.4 million in 2010-2016. This rise was driven by new job opportunities that enabled higher female participation.
Also, the Gini coefficient increased from 33.1 to 34.5 in urban areas, while it decreased from 29.2 to 28.2 in rural areas. Not only did the gap in the poverty rate between urban and rural areas narrow (from 17.2 to 5.8 percentage points), but urbanization also progressed. As a result, the share of the urban poor increased. By 2022, one in four poor Bangladeshis lived in urban areas. Nevertheless, the poverty rate in rural areas is still six percentage points higher than in urban areas (20.5% compared to 14.7%).
The report reveals that urban Bangladesh, once the engine of progress, slowed down as factory jobs didn't grow as expected, and earnings stagnated for many city households. Income inequality rose sharply in towns and cities, driven by differences in wages, remittances, and asset ownership.
Eastern-Western poverty gap shrinks
The gap in poverty rates between the eastern and western regions closed, as divisions with higher rates reduced poverty fastest after 2016. After lagging during the period 2010-2016, the West caught up with the East due to larger and more pro-poor consumption growth.
Although the poverty rate in the eastern and western regions converged to around 18% in 2022, some disparities persist across divisions. For example, Rangpur and Barisal present poverty rates higher than the national average (around 26%), while Khulna, Chittagong, Rajshahi, and Sylhet have lower rates (around 16%). Dhaka is aligned with the national average (around 20%).
Social protection is expanding – but poorly targeted
Bangladesh now spends more on safety nets and social support than ever before. But the report says the systems are riddled with weaknesses.
Too many benefits go to the wrong people. Subsidies often favour the better-off.
Those who need help the most – the poorest, informal workers, the elderly poor – frequently get left out.
Improving targeting, the report argues, could dramatically increase the impact of existing spending.
The quality gap: Services expanded, but not enough
Bangladesh's rapid improvements in access to electricity, sanitation, and education lifted 34 million people out of multidimensional poverty.
But the report points out a persistent problem: poor quality. Power supply is still unreliable. Students are going to school but learning too little. Transport infrastructure has expanded, but delays and poor connectivity continue to hold back growth.
These gaps limit how much families and businesses can benefit from improved services.
Recent trends signal new challenges for Bangladesh
Amid ongoing global and domestic instability, economic growth has slowed, leading to a projected rise in poverty in the short term. Since 2023, macroeconomic conditions have deteriorated, with 2025 marking a downturn almost comparable to the Covid-19 pandemic period.
The report says the welfare of Bangladeshi households has been adversely affected, primarily through labour market channels: employment has declined, particularly among women and youth, and real labour incomes have fallen for less-skilled workers. These dynamics have been compounded by a sharp shift in relative prices, as inflation has significantly outpaced wage growth for the poorest, with price increases in 2025 estimated to be more than double those observed during the pandemic.
Nevertheless, the negative effects have been partially cushioned by a continued flow of international remittances and the maintenance of social assistance programs. Overall, nearly 2 million additional vulnerable individuals are estimated to have fallen into poverty in 2025, alongside a widening of inequality – whether measured by the Gini coefficient or the prosperity gap.
A chance to reset the path
Despite the slowdown, the assessment report says Bangladesh still has a "historic opportunity" to reignite poverty reduction, but it requires a course correction.
Among the priorities are:
Linking villages and cities through better transport and logistics, creating more productive urban jobs, especially in manufacturing and services, revitalising agriculture with value chains that benefit small farmers and building shock-responsive social protection for a more volatile world.
With inflation, climate change, and global economic uncertainty posing fresh pressures, the report warns that the next decade will demand a more inclusive and resilient model of growth.
