The World Bank Group has warned that developing economies are heading towards a significant employment crisis as millions of young people prepare to enter the workforce without enough jobs to absorb them, raising concerns about economic stability, migration pressures and global security risks.

In a blog post published on its official platform, the Washington-based institution said demographic shifts unfolding across developing countries represent one of the most consequential but underappreciated forces shaping the global economy over the next decade.

According to the World Bank, about 1.2 billion young people in developing countries are expected to reach working age within the next 10 to 15 years, while current economic projections indicate that only around 400 million jobs are likely to be created during the same period. The mismatch, it said, could leave hundreds of millions without access to productive employment.

The President of the World Bank Group, Ajay Banga, noted that while global attention is often captured by immediate crises such as conflicts, technological disruptions and market volatility, slower-moving structural forces like demographics, food and water pressures, and globalisation trends are likely to have deeper and longer-lasting consequences.

“This challenge is not only a development issue,” Banga wrote in the post. “It is an economic challenge and increasingly a national security concern.”

The institution warned that failure to address the widening employment gap could strain public institutions and contribute to irregular migration, social unrest and insecurity, particularly in regions with rapidly growing youth populations.

It added that the issue received limited attention during discussions at recent global gatherings, such as the World Economic Forum Annual Meeting in Davos, where more immediate geopolitical and economic concerns dominated conversations.

The bank urged policymakers to elevate job creation as a central topic in upcoming international forums, including meetings of the G-7 and G-20, stressing that early intervention could transform demographic growth into an economic advantage rather than a destabilising force.

To address the looming challenge, Banga said it is advancing a jobs-focused strategy built on three core pillars: infrastructure development, business environment reforms, and support for private-sector expansion.

First, the institution emphasised investment in both physical and human infrastructure, including reliable electricity, transport systems, healthcare and education. Without these foundations, it said, private investment and employment opportunities struggle to materialise.

The bank cited an example of a skills development centre in Bhubaneswar, India, supported through collaboration between government and private-sector partners, which trains nearly 38,000 people annually with programmes aligned to labour market demand, enabling most graduates to secure employment or create businesses.

Second, the World Bank highlighted the importance of predictable regulations and clear policy frameworks to encourage entrepreneurship and investment.

It said job creation at scale depends largely on private enterprises, particularly micro, small and medium-sized businesses that account for the majority of employment in developing economies.

The third pillar focuses on helping firms grow through financing tools provided by the bank’s private-sector arms, including equity investments, guarantees and political risk insurance aimed at reducing investment risks.

One example cited was a trade finance guarantee supporting Brazil’s Banco do Brasil, expected to unlock about $700m in affordable financing for small businesses, especially in agriculture.

The World Bank identified five sectors with the highest capacity to generate employment at scale: infrastructure and energy, agribusiness, primary healthcare, tourism and value-added manufacturing.

It stressed that investments in these areas are based on evidence from country-level experiences showing where limited public and private resources can produce the greatest employment impact.

The institution also argued that addressing the jobs gap is not a zero-sum exercise between developed and developing nations. By 2050, more than 85 per cent of the world’s population is projected to live in developing countries, representing both the largest expansion of the global labour force and a major source of future consumer demand.

Growing developing economies, the bank said, could become stronger trading partners and more resilient supply-chain hubs, benefiting advanced economies through expanded markets and reduced migration pressures.

The World Bank said the main barrier to investment in developing markets has historically been risk, both real and perceived, rather than lack of opportunity. Development institutions, it added, can play a catalytic role by financing infrastructure, supporting regulatory reforms and helping reduce investment uncertainty.

“If we get this right, demographic change can become an engine of growth and stability,” the bank noted. “If we get it wrong, the world will continue reacting to crises that were visible years in advance.”