Khairul Alam; Dbarta24 — The ongoing conflict in the Middle East has begun casting a severe shadow over Bangladesh’s economy, threatening 600,000 jobs and potentially trapping an additional 1.2 million people in poverty as rising energy prices, raw material supply disruptions, and industrial bottlenecks take a heavy toll.
According to a mid-June evaluation by the World Bank—conducted as part of a proposed budget assistance project—the country’s poverty reduction momentum faces a drastic setback.
While an estimated 1.7 million people were projected to exit poverty this year under normal conditions, the spillover effects of the Middle East crisis could reduce that figure to roughly 500,000, leaving over a million citizens unable to break free from financial hardship.
The economic fallout comes at a time when Bangladesh is already navigating macroeconomic vulnerabilities, including persistent inflation, a fragile banking sector, and constrained fiscal space.
High energy costs are expected to directly fuel inflation by over 0.5 percentage points if fully passed on to consumers, driving up transportation, power, and manufacturing expenses across the board.
Addressing the broader inflationary environment, Finance and Planning Minister Amir Khasru Mahmud Chowdhury recently noted that inflation fell below 9% in July, adding that price pressures would have eased further had the Middle East conflict not intervened.
Bangladesh remains particularly vulnerable in its energy sector, where gas accounts for over half of primary energy supplies.
Domestic gas production has declined by 15% from its peak in 2016, leaving the country heavily reliant on imports—60% to 65% of imported crude oil and 55% to 60% of liquefied natural gas (LNG) originate from the Middle East.
Due to global market volatility, force majeure has been declared on five out of six LNG supply contracts with Petrobangla, forcing spot market purchases at prices between $24 and $28 per MMBtu, more than double historical baselines.
The World Bank estimates government energy subsidies could swell to 2.8% of GDP in FY 2025–26, straining state resources and risking cuts to social safety nets.
The energy crunch is also spilling over into agriculture and health sectors. Five out of six state-run urea fertilizer factories have halted operations due to gas supply shortages, driving urea prices up by nearly 30% with risks of doubling if the crisis persists.
Meanwhile, healthcare costs are escalating as hospitals rely heavily on costly generator power and imported medical supplies.
Commenting on the labor market fallout, Professor Mustafizur Rahman, Distinguished Fellow at the Centre for Policy Dialogue (CPD), confirmed that employment pressures are already visible across key sectors.
“Industrial units are not receiving new gas connections. Shift hours have been reduced in several facilities, and some factories have shut down entirely due to the energy crisis,” Professor Rahman said.
“Recent instances of factory closures and worker layoffs underscore the severity of the situation. The World Bank’s projection of 600,000 job losses clearly reflects this growing reality.”