What economists say led to drop in poverty reduction after 2016

At the launch of the World Bank's report, Bangladesh Poverty and Equity Assessment 2025, the country's leading economists delivered a stark warning: Bangladesh is entering a phase where long-held assumptions about growth, jobs, and poverty no longer hold.

They said the World Bank's findings reflect a deeper national concern – growth is becoming less inclusive, repeated shocks have eroded earlier gains, and the institutional foundations of poverty reduction are weakening.

'Mega projects boost GDP but fail to create jobs, reduce poverty'

Hossain Zillur Rahman, executive chairman of the Power and Participation Research Centre (PPRC) and chief guest at the WB report's launch at a Dhaka hotel yesterday, said the findings can be understood only by examining three distinct political-economic periods: 2010-16, 2016-22 and 2022-25.

After 2016, governance incentives shifted, rule-based systems weakened, corruption incentives deepened, and inclusiveness eroded.

Hossain Zillur Rahman, Executive Chairman, PPRC

"The first period still reflected the old growth poverty reduction model, but after 2016, governance incentives shifted, rule-based systems weakened, corruption incentives deepened, and inclusiveness eroded.

"During this period, the government focused heavily on mega projects and headlines of growth. But it did not consider the implications for employment and poverty reduction. Mega projects have boosted growth, but that growth has not been inclusive," he added.

Citing the example of the Padma Bridge, he said the project did contribute to GDP growth, but it did not generate employment on a comparable scale. Its implementation relied heavily on technology, limiting job creation.

He warned that the 2022-25 period marks a real structural reversal, not a short-term disruption. Poverty has risen to around 27%, extreme poverty is climbing, and 2.1 million jobs were lost in late 2024 – 1.5 million of them women.

Agriculture's renewed prominence, he said, stems not from rural strength but from stagnation elsewhere: "We must ask whether rural dynamism reflects productivity or simply low-paid informal work."

He emphasised three state failures: corruption, everyday bureaucratic "hayrani", and weak security for women as critical barriers to inclusive growth.

"Education is expanding, yet not translating into human capital. Unless we solve this paradox, new skill programmes will only reinforce the existing mismatch," he added.

'Distorted data masked true poverty slowdown'

Speaking with TBS about the World Bank report, Zahid Hussain, former lead economist at the World Bank's Dhaka office, said that while the report correctly notes a slowdown in poverty reduction after 2016, it fails to explain why. He said the key issue is that the "elasticity of poverty reduction to growth" dropped sharply because the growth data itself became distorted.

Although GDP growth appeared higher in 2016-2022 compared to 2010-16, poverty fell more slowly, largely due to manipulation of growth figures.

Zahid Hussain, former lead economist at the World Bank's Dhaka office

Although GDP growth appeared higher between 2016 and 2022 compared to 2010-16, poverty fell more slowly. According to him, this is largely due to statistical manipulation – growth figures were inflated in a "blatantly visible" way during this period, a point the report does not address.

Zahid noted that the World Bank's 2022 Country Economic Memorandum even raised questions about Bangladesh's growth statistics, but the new poverty report overlooks this critical factor.

He also linked the issue to a broader decline in democratic governance after 2014, arguing that with reduced electoral competition, the government sought legitimacy by showcasing mega projects and "mega statistics," including overstated GDP growth. These projects, he said, did little to raise labour incomes or industrial growth.

In reality, he concluded, actual growth weakened after 2016, but this was not reflected in official data, making the slowdown in poverty reduction unsurprising.

'Where are the jobs?'

Zaidi Sattar, chairman of Policy Research Institute of Bangladesh (PRI), raised a set of pointed questions on how Bangladesh can make economic growth more employment-rich and inclusive. Referring to the report's focus on strengthening foundations for productive jobs.

"Where are those better jobs?" he asked.

He argued that simply expanding access or enabling markets for the rural poor is insufficient without clarity on which markets can realistically generate large-scale employment.

Sattar noted that the domestic market, supported by a $460 billion GDP, cannot alone absorb the roughly 2 million new entrants to the labour force each year. Although around 1 million workers migrate abroad annually for temporary employment, easing some pressure, domestic job creation still remains constrained.

Agriculture, which employs 45% of the workforce, cannot be the source of high-quality, high-wage jobs, he said. "Wage employment is not available in agriculture. Wage employment comes from industry." Bangladesh, he stressed, is still in its industrialisation phase, not deindustrialisation and therefore must continue expanding its industrial base to generate jobs."

Drawing on three decades of experience since the 1990s, Sattar emphasised that Bangladesh's most inclusive growth periods came from integration with global markets. "If you want job creation, we have to continue industrialising with the global market in our region," he said.

He argued forcefully that Bangladesh must continue industrialising with global markets, warning that rising protectionism is undermining job creation.

"We have one of the most restrictive trade regimes in the world," he said.

He called for an open trade regime and stronger integration between rural and urban economies, an area where China and Vietnam have shown the way. Sattar concluded by commending the report's analytical strength but urged the inclusion of a sharper policy lens: "Growth will not be inclusive or job-creating unless our policies are more open than they are today."

'Poverty trends need deeper explanation, not just data'

Mustafizur Rahman, distinguished Fellow at CPD, said the World Bank's report offers a strong analytical foundation but leaves critical poverty-related questions unanswered.

He welcomed its detailed mapping of structural drivers yet noted that the Household Income and Expenditure Survey 2022 was surprisingly silent on Covid-19, despite the pandemic's major economic shock. 

Surveys by South Asian Network on Economic Modelling (SANEM), BRAC Institute of Governance and Development (BIGD), PPRC and CPD had clearly shown a sharp though temporary rise in poverty during 2020-21, he reminded.

Mustafizur said any serious poverty assessment must account for the combined impacts of Covid, the Russia-Ukraine war, and three years of persistent inflation, which reshaped household welfare nationwide. 

While agreeing that growth alone cannot reduce poverty, he argued that Bangladesh must confront the institutional and political-economic constraints behind slowing job creation and weakening inclusiveness. "These questions are critical," he said, urging deeper debate to ensure effective policy reform.

'Poverty assessment must address structural barriers'

Moderating the report launching event, Selim Raihan, executive director of SANEM, said that while the report presents a strong analysis of poverty drivers and structural vulnerabilities, it leaves several critical gaps. 

His foremost concern was the absence of Covid-19 impacts in the 2022 BBS survey, which, he noted, portrayed poverty trends "as if there was no pandemic in the world." This omission stands in contrast to rapid surveys by SANEM, BIGD, PPRC, CPD and others that documented a clear spike in poverty during 2020-21.

Selim Raihan added that other major shocks, such as the Russia-Ukraine war, prolonged price volatility, and three years of high inflation, must be integrated into any meaningful poverty narrative. 

While endorsing the report's message that growth alone cannot reduce poverty, he stressed that Bangladesh must confront the institutional and political-economic constraints behind slowing poverty reduction and stagnant job creation. Without addressing these deeper issues, he warned, policy responses will remain incomplete.