Middle East Conflict Could Push 1.2 Million Into Poverty

A new analysis by the World Bank warns that ongoing geopolitical tensions in the Middle East could significantly worsen poverty conditions in Bangladesh, potentially pushing an additional 1.2 million people below the poverty line this year. The assessment highlights how external shocks—combined with persistent inflation and domestic economic constraints—are reversing earlier poverty reduction gains.

The findings were published in the April edition of the Bangladesh Development Update, unveiled at a press briefing in Dhaka. The report was presented by senior economist Dhruv Sharma, with additional remarks from World Bank officials overseeing Bangladesh operations.

At the core of the projection is a sharp revision to earlier expectations. Before the escalation of conflict, it was estimated that around 1.7 million Bangladeshis would rise above the poverty threshold in 2025. However, under current conditions, only about 500,000 are expected to do so—meaning nearly 1.2 million people who might have escaped poverty will now remain below the line.

Poverty Trends Under Pressure

The report notes that Bangladesh’s poverty rate, measured at the international threshold of USD 3 per day for working-age individuals, has already been rising in recent years. The rate increased from 18.7% in 2022 to 21.4% in 2025, with an estimated 14 million people falling into poverty during this period alone.

If geopolitical instability persists, the World Bank projects that poverty reduction could slow dramatically. Under a stable scenario without conflict-related disruptions, the poverty rate was expected to decline to around 19.3% by 2028. That trajectory is now considered increasingly uncertain.

Economic Growth Outlook Weakens

The report also revises Bangladesh’s macroeconomic outlook downward, forecasting gross domestic product (GDP) growth of just 3.9% for the 2025–26 fiscal year. This reflects weaker external demand, inflationary pressures, and trade-related disruptions linked to global uncertainty.

Channels of Impact

The World Bank identifies at least six key transmission channels through which Middle East instability is expected to affect Bangladesh’s economy:

Inflation, Wages and Jobs Under Strain

According to the report, persistent inflation, weak wage growth, and slowing job creation are among the key domestic factors exacerbating poverty. Rising prices have eroded real incomes, particularly for low-income households, while employment growth has not kept pace with labour market demand.

The report also warns that inequality is likely to widen further. The Gini coefficient, a standard measure of income inequality, is projected to increase modestly but significantly, reflecting uneven economic recovery across income groups.

Policy Concerns and Reform Urgency

Speaking at the briefing, Jean-Pascal Nguessa noted that Bangladesh is facing structural challenges in revenue mobilisation and external competitiveness. He highlighted that domestic fiscal constraints, combined with trade pressures including countervailing tariffs, are constraining economic resilience.

He stressed that while reform efforts have begun in several areas, their continuation and acceleration are essential. However, he also cautioned that meaningful reforms would be difficult under current global conditions, making short-term policy responses increasingly important.

Outlook: Rising Risks, Slower Progress

The overall outlook presented by the World Bank suggests that Bangladesh’s progress in poverty reduction is facing renewed headwinds from both external shocks and domestic structural weaknesses. While long-term development goals remain intact, the near-term trajectory is increasingly vulnerable to geopolitical instability, inflationary pressures, and slowing growth.

Unless mitigating policies are introduced—particularly in fiscal management, labour market expansion, and inflation control—the risk of rising poverty and widening inequality is expected to persist into the medium term.