Political tensions in Bangladesh under the Muhammad Yunus-led interim government may increase in the future due to differences of opinion among political parties on the timing of the elections, states a World Bank (WB) report. These factors, it said, will weigh heavily on investment growth and disrupt the Bangladeshi economy.

The latest report of the WB titled ‘Bangladesh Development Update’ revealed that real GDP growth is projected to decline to 3.3 per cent in Fiscal Year 2025 from 4.2 per cent last year and 5.8 per cent in FY-2023. The World Bank estimated that the national poverty rate will grow from 20.5 per cent in 2024 to 22.9 per cent in 2025.

The report has warned that an additional three million people in Bangladesh are expected to fall into extreme poverty in 2025, as the extreme poverty rate is projected to rise from 7.7 per cent to 9.3 per cent.

It forecast that the weak situation in the labour market would continue in the current year, while general people, particularly those vulnerable to extreme poverty, may register a decline in their actual income.

“A weak law-and-order situation, poor business environment, and lack of job opportunities discouraged job seekers, especially women, prompting many to leave the labor market,” said the report

“The labour market conditions are expected to remain weak and real wages are expected to decline across all sectors in 2025. With the slowdown in economic activity, vulnerable populations are likely to be disproportionately affected, widening social and economic disparities,” the report added.

It further highlighted that inflation has remained high due to supply chain disruptions, high energy prices, and higher import prices because of the depreciating Bangladeshi currency.

“High inflation and job losses have strained economic welfare, particularly for low-income households who spend a larger share of their income on essential goods,” according to the report.

Apart from the economic risks, the report also flagged political tensions as a growing source of concern in Bangladesh.

“Safety and security concerns remain and are likely to continue until the restoration of a fully functioning police force,’ it said.