Bangladesh could lose nearly 600,000 jobs in 2026 as the conflict in the Middle East compounds long-standing weaknesses in the economy, including high inflation, energy insecurity, weak investment and limited fiscal and foreign-exchange buffers, the World Bank said.
The projection appears in the World Bank’s Contingent Emergency Response Project (CERP) paper, dated 15 June 2026, which uses findings from its April 2026 Bangladesh Development Update to assess the impact of the latest external shock.
The employment shock is expected to further undermine poverty reduction. Before the Middle East conflict, about 1.7 million people were projected to move out of poverty in 2026. That estimate has now fallen to 500,000, meaning about 1.2 million fewer people are expected to escape poverty than previously projected.
The deterioration follows an estimated 1.4 million increase in the number of poor people in 2025, when limited job creation, weak labour-income growth and high inflation reduced the poverty-reducing effect of economic growth.
Rising prices are projected to account for about 10 per cent of the increase in poverty in 2026. The World Bank estimates that partial pass-through of higher energy prices could add more than 0.5 percentage point to inflation, with second-round increases in food and non-food prices likely to hit poorer households hardest and widen the poverty gap.
A weaker job market faces another shock
The projected job losses are coming on top of a labour market that has already been shifting towards less productive work.
Between 2016 and 2024, seven out of 10 new jobs were created in low-productivity agriculture, according to the World Bank. Nearly 80 per cent of workers are employed in the informal economy, leaving most without adequate social protection.
Real wages have remained negative since May 2021 as inflation stayed around 9 per cent for three consecutive years, eroding workers’ purchasing power.
A prolonged disruption could accelerate movement from formal jobs into lower-productivity informal work, further weakening household incomes and labour productivity.
Micro, small and medium enterprises are particularly exposed to the downturn. Businesses face an average of 26 power outages a month, while high input costs and raw-material shortages are disrupting production. The ready-made garment industry, one of the country’s major sources of jobs and export earnings, is among the sectors facing weaker labour demand.
The impact is also uneven by gender. Women-owned and women-led micro, small and medium enterprises are experiencing greater revenue losses, higher input costs and more business closures during the crisis.
Growth weakens as policy space narrows
The World Bank has cut its FY2025-26 real GDP growth forecast to 3.9 per cent. The current-account deficit is projected at 0.8 per cent of GDP, while the fiscal deficit is expected to reach 4.4 per cent of GDP and could widen to about 5 per cent as the government faces higher energy subsidies and bank recapitalisation costs.
The ability to respond is constrained by weak public finances and banking-sector stress.
The tax-to-GDP ratio fell below 7 per cent in FY2024-25, the first time in 15 years. At the same time, the banking sector’s non-performing loan ratio reached 30.6 per cent in December 2025, while its capital adequacy ratio was less than half the regulatory minimum of 10 per cent.
Low foreign-exchange reserves further limit the government’s capacity to absorb a prolonged external shock.
Energy turns external conflict into domestic pressure
Bangladesh’s dependence on imported energy has made the Middle East conflict a direct economic threat.
Gas accounts for more than half of the country’s primary energy supply, but domestic gas production has declined 15 per cent from its 2016 peak. Bangladesh imports 60-65 per cent of its crude oil and 55-60 per cent of its LNG from the Middle East.
The conflict disrupted those supply channels. Five of Petrobangla’s six LNG supply contracts declared force majeure, pushing Bangladesh into the spot market, where LNG prices rose to $24-$28 per million British thermal units, more than double previous levels.
The higher import cost is expected to push energy subsidies to 2.8 per cent of GDP in FY2025-26, with the total subsidy burden estimated at $2.5 billion-$4.8 billion.
The consequences extend beyond the energy sector. Higher fuel costs increase factory operating expenses and food-production costs, add to inflation and consume fiscal resources that could otherwise support social protection and other emergency measures.
Food security faces its own exposure
Bangladesh is also vulnerable to food-price and supply shocks because domestic agriculture depends heavily on imported fertiliser and energy.
That makes global disruptions capable of passing quickly into farm costs, food prices and household poverty, particularly among low-income consumers already facing weaker real incomes.
The World Bank estimates that 56 per cent of the population is exposed to natural hazards. Floods can cover up to two-thirds of the country every three to five years, while tropical cyclones strike every two to three years.
The combination of natural disasters, health emergencies, food insecurity and geopolitical shocks leaves Bangladesh vulnerable to simultaneous damage to production, household incomes and public finances.
What the World Bank is proposing
The World Bank is backing a Contingent Emergency Response Project designed to release financing rapidly when major shocks occur rather than relying solely on conventional project-processing timelines.
Its proposed labour-market measures include targeted cash transfers to viable crisis-affected micro, small and medium enterprises to help preserve existing jobs and cash-for-work programmes to provide temporary income to affected households.
The bank has also warned that emergency financing should not become a substitute for structural reform. Repeated reliance on crisis measures, it says, could leave Bangladesh trapped in short-term responses to recurring shocks instead of addressing the underlying weaknesses in revenue mobilisation, energy security, financial-sector stability and job creation.
The immediate consequence of the current shock could be nearly 600,000 fewer jobs in 2026, a sharp reduction in the number of people escaping poverty and deeper pressure on wages and household consumption.
The broader risk is that workers pushed into informal, low-productivity employment, businesses forced to scale back operations and a government with little fiscal room to intervene could turn a temporary external shock into a longer-lasting setback to Bangladesh’s growth and poverty reduction.
