A fresh assessment by the World Bank warns that escalating geopolitical tensions in the Middle East could significantly worsen economic conditions in Bangladesh, potentially pushing an additional 1.2 million people below the poverty line within the year. The report highlights how external shocks, combined with persistent inflation and structural domestic weaknesses, are undermining earlier progress in poverty reduction.
The findings are detailed in the April edition of the Bangladesh Development Update, released at a briefing in Dhaka. The presentation was delivered by senior economist Dhruv Sharma alongside other World Bank officials overseeing Bangladesh’s country operations.
At the core of the analysis is a sharp downward revision of earlier projections. Before the escalation of conflict, it was anticipated that around 1.7 million Bangladeshis would rise above the poverty threshold in 2025. Under current global conditions, however, only about 500,000 are now expected to do so. This implies that approximately 1.2 million people who would otherwise have escaped poverty are likely to remain below the poverty line.
Poverty Trends Under Renewed Pressure
The report outlines a concerning upward trajectory in poverty over recent years. Using the international benchmark of USD 3 per day for working-age individuals, Bangladesh’s poverty rate has increased from 18.7% in 2022 to 21.4% in 2025. Over this period, an estimated 14 million people have fallen into poverty.
Under a stable global environment without conflict-related disruptions, poverty was projected to decline steadily to around 19.3% by 2028. However, the report now cautions that this pathway is increasingly uncertain due to heightened external volatility and domestic constraints.
Growth Forecast Revised Downwards
The World Bank has also downgraded Bangladesh’s macroeconomic outlook, projecting GDP growth of just 3.9% for the 2025–26 fiscal year. The weaker outlook reflects subdued external demand, persistent inflationary pressures, and disruptions in global trade flows linked to geopolitical instability.
Key Channels of Economic Impact
The report identifies six principal transmission channels through which Middle East tensions are expected to affect Bangladesh’s economy:
| Impact Channel | Expected Effect |
|---|---|
| External balance | Pressure on current account due to trade disruption, remittances volatility, and currency depreciation |
| Economic growth | Weaker consumption and investment slowing GDP expansion |
| Inflation | Rising fuel and transport costs pushing up prices |
| Poverty levels | Up to 1.2 million additional people falling below the poverty line |
| Fiscal pressure | Increased subsidy burden, particularly for fuel and fertiliser |
| Inequality | Gini coefficient projected to rise by 0.2% in 2026 |
Inflation, Wages and Labour Market Strain
The report underscores that persistent inflation, weak real wage growth, and slowing job creation are key domestic factors exacerbating poverty. Rising prices have significantly eroded real incomes, particularly among low-income households, while employment growth has failed to keep pace with labour force expansion.
It also warns that income inequality is likely to widen further. Although the projected rise in the Gini coefficient is modest, it signals uneven recovery patterns across different income groups, with lower-income households bearing a disproportionate burden of economic stress.
Policy Concerns and Reform Priorities
At the Dhaka briefing, Jean-Pascal Nguessa highlighted structural constraints facing Bangladesh, particularly weak revenue mobilisation and challenges in external competitiveness. He noted that fiscal limitations, combined with trade pressures such as countervailing tariffs, are constraining macroeconomic resilience.
While acknowledging that reform initiatives are underway, he emphasised the need to sustain and accelerate them. However, he also cautioned that implementing deeper structural reforms would be more difficult in the current global environment, making short-term stabilisation measures increasingly important.
Outlook: Rising Risks to Poverty Reduction Progress
Overall, the World Bank assessment suggests that Bangladesh’s progress in reducing poverty is facing renewed setbacks due to a combination of external shocks and internal structural challenges. While long-term development ambitions remain intact, the near-term outlook is increasingly fragile.
Without timely and coordinated policy responses—particularly in fiscal management, employment generation, and inflation control—the risk of rising poverty and widening inequality is expected to persist, potentially reversing years of gradual socio-economic gains.