Around 44 percent of university graduates in Bangladesh are employed in the informal sector, highlighting the country’s struggle to translate higher education into formal employment opportunities, according to a World Bank report released on Tuesday.

Bangladesh has about two decades to fully harness its demographic dividend before the share of its working-age population peaks in 2045, but urgent reforms are needed to translate this opportunity into better jobs, higher productivity and sustainable economic growth, the World Bank has warned.

The warning came in a new World Bank report titled Demographic Change in South Asia: From Tailwinds to Headwinds for Development, released on Tuesday.

According to the report, Bangladesh has more time than most South Asian countries to benefit from its favourable population structure.

However, structural weaknesses, including inadequate formal job creation, low female labour-force participation and persistent skills gaps, are preventing the country from making the most of this opportunity.

Around 84 percent of Bangladesh's workforce, or approximately 58 million people, are employed in the informal sector, the report says.

Formal businesses are generating jobs slowly, while small firms have recently reduced their workforce on average, it said.

“Bangladesh’s demographic opportunity depends on what it does now: help firms create better jobs, equip young people with market-relevant skills, and remove barriers that keep women out of work,” said Jean Pesme, World Bank Division Director for Bangladesh and Bhutan.

He said Bangladesh also needs to strengthen healthcare and old-age income security to prepare for an ageing population.

Meeting the growing financial needs arising from the demographic transition will require stronger domestic resource mobilisation, he added.

The report says South Asia currently has a working-age population of 1.17 billion, providing the region with a major opportunity to accelerate economic growth.

However, this window of opportunity is gradually closing, as the region's working-age population is expected to peak and begin declining in less than a decade.

By 2049, South Asia is projected to become an aged region, with 14 percent of its population aged 65 or above. Bangladesh is expected to reach this stage in 2051.

Since 2000, the rising share of adults in their prime working years has contributed 0.4 percentage points to South Asia's annual GDP growth and boosted labour productivity by 1.1 percent a year.

However, the annual contribution of demographic factors to GDP growth is projected to fall to just 0.1 percentage points by 2050.

The report also finds that South Asia is ageing faster and at a lower per capita income level than comparable emerging market and developing economies.

“South Asian economies are ageing faster and earlier in their development journeys,” said Johannes Zutt, World Bank Vice President for South Asia.

He said countries need to adopt appropriate policies and build infrastructure to create more and better jobs, maximise the benefits of their youth dividend and prepare for an ageing population.

Such measures would help the region make better use of its large working-age population and lay the foundation for a second demographic dividend, with healthier older people continuing to contribute to the economy, he added.

The report points out that healthcare, long-term care and pension systems across South Asia remain inadequately prepared to meet the needs of people living longer, often without necessarily enjoying better health.

Only 17 percent of the region's working-age population contribute to pension schemes, while just 10 percent of older people receive pension benefits, the lowest coverage rate globally.

The World Bank recommends that South Asian countries create more productive jobs, expand access to finance for micro, small and medium enterprises, simplify regulations and improve healthcare, education and skills development.

Removing barriers to women's employment is also essential to sustaining the benefits of the youth dividend, it says.

At the same time, countries need to strengthen healthcare, long-term care and pension systems to support ageing populations.

Greater savings and investment will also be necessary to boost productivity and unlock a second demographic dividend, the report adds.