The US-Israel conflict with Iran has dealt a significant blow to Bangladesh’s economy, heavily reliant on imported fuel and remittances from the Middle East, as reported by The Daily Star newspaper. Economists warn of a chain reaction from the crisis, including rising energy prices, disrupted trade flows, weakened export competitiveness, labor market turmoil, higher inflation, and pressure on foreign exchange reserves. Zahid Hussain, a former lead economist at the World Bank’s Dhaka office, highlights three channels through which Bangladesh’s economy could be affected: energy, the dollar, and trade and finance.
The immediate impact of the Iran conflict is felt in global oil markets, with Brent crude prices soaring to $88 per barrel from around $72 before the war outbreak. Major shipping lines have halted cargo bookings between the Indian subcontinent and the Gulf, potentially hurting Bangladesh. The country, reliant on imported fuel, faces challenges as oil price spikes inflate energy import bills, leading to fuel rationing and panic buying at fuel stations nationwide.
Bangladesh’s struggle with high inflation faces further pressure as global oil price hikes raise transport and logistics costs, impacting various sectors from agriculture to household expenses. The country’s foreign exchange reserves are at risk due to energy imports being a significant outflow. Additionally, the Bangladeshi taka may depreciate further against the dollar, affecting imported goods’ prices and reinforcing inflationary trends.
The large Bangladeshi migrant workforce in the Middle East, a key source of remittances, faces uncertainties as economic activities in the Gulf could slow down. Remittance inflows, crucial for balancing the country’s import bills, may decrease if employment opportunities for migrant workers diminish. Any slowdown in remittances would further strain Bangladesh’s external balance, exacerbating economic challenges amid the ongoing crisis.
