New Delhi, April 9 A protracted conflict in the Middle East could push Bangladesh's inflation higher, widen the current‑account deficit, weaker exports, lower remittances and reduce fiscal space as energy subsidies rise, a new report has said.
The latest Bangladesh Development Update projects growth to slow to 3.9 per cent in FY26, World Bank said.
Bangladesh’s economy also faces rising poverty, persistent inflation, stressed banking sector, weak revenue mobilization, and subdued private investment, compounded by the Middle East conflict.
Inflation remained high at 8.5 per cent in FY26, with both food and non-food inflation elevated. Wages of low-income workers did not keep pace with inflation, reducing their purchasing power. The national poverty rate increased to 21.4 per cent in 2025 from 18.7 per cent in 2022, adding 1.4 million more poor people in 2025.
"With thin foreign exchange buffers, tight fiscal and monetary conditions, and a fragile banking sector, Bangladesh has limited capacity to absorb a prolonged shock and to mitigate its impact on its people, notably the most vulnerable," the report said.
However, sustained political stability after the 2026 elections and rapid progress on structural reforms can support recovery, the report said, adding that urgent policy and institutional reforms are necessary to restore macroeconomic stability, boost revenues and strengthen the financial sector.
“Without decisive structural reforms, especially in revenue mobilization, the financial sector and the business environment, this resilience cannot last,” said Jean Pesme, World Bank Division Director for Bangladesh and Bhutan.
Dhruv Sharma, Senior Economist urged improving the business environment to sustain growth and absorb a rapidly expanding workforce.
“Targeted smart deregulation, stronger competition policy, competitive neutrality for state-owned enterprises, streamlined trade policies, and improved electricity reliability are critical to private-sector led growth and jobs creation,” the report noted.
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