The conflict in the Middle East is expected to slow global growth to its lowest rate since the onset of the COVID-19 pandemic, the World Bank Group said Thursday.
In its latest Global Economic Prospects report, the bank forecast global growth to slow to 2.5% in 2026, down from 2.9% in 2025, amid higher energy prices, steeper inflation and increased borrowing costs.
The bank said forecasts for two-thirds of economies had been downgraded compared with January. Global growth is expected to improve to 2.8% in 2027, but remain 0.4 percentage points below the average recorded during the 2010s.
According to the report, the closure of the Strait of Hormuz has severely disrupted energy markets, with Brent crude oil prices projected to average $94 per barrel in 2026, 36% above 2025 levels, assuming the worst disruptions ease in July.
Fertilizer prices are also forecast to rise significantly this year, with spillover effects on food prices. These pressures are expected to push global inflation to 4.0% in 2026, up from 3.3% in 2025.
The World Bank warned that downside risks remain significant. If energy supply disruptions become more severe and are accompanied by substantial financial stress, global growth could fall to 1.3% in 2026, while inflation could rise to 4.4%.
Growth in developing economies is expected to fall to a post-pandemic low of 3.6% in 2026 from 4.4% in 2025, before recovering to 4.2% in 2027.
Economies in the Gulf directly affected by the conflict are expected to see the sharpest slowdown, with growth falling from 3.9% in 2025 to close to zero in 2026. Growth in these economies is forecast to rebound to about 5% in 2027-2028 as trade recovers and reconstruction spending begins.
World Bank ready to scale up support
The World Bank Group said it is immediately making up to $50 billion-$60 billion available through existing instruments in response to the conflict, including $25 billion in pre-arranged financing.
The support can be used for social safety nets, fiscal capacity, working capital and liquidity support for firms and farms, the bank said.
It added that more than 30 countries are actively working with the World Bank Group to improve readiness and enable a rapid response to the crisis. If the conflict and its economic fallout persist, the bank said it can scale up support to $80 billion-$100 billion over 15 months.
By region, South Asia is expected to record the strongest growth in 2026, though its growth is projected to slow to 6.3% from 7.0% in 2025.
Sub-Saharan Africa’s growth is expected to edge down to 4.0% in 2026 before rising to 4.4% in 2027, with pressures coming mainly from inflation and high food prices linked to fertilizer shortages.
Growth in East Asia and the Pacific is projected to fall to 4.2% in 2026 before rising to 4.4% in 2027. Europe and Central Asia are forecast to slow to 2.1% in 2026 and edge up to 2.3% in 2027.
Latin America and the Caribbean are expected to grow 2.2% in 2026 and 2.5% in 2027, while the Middle East, North Africa, Afghanistan and Pakistan region is forecast to slow to 1.6% in 2026 before recovering to 5.0% in 2027.
The report also warned that rising debt levels are making it harder for developing economies to respond to crises and invest in long-term development priorities.
Since 2010, aggregate government debt in developing economies has climbed from below 40% of gross domestic product (GDP) to more than 70%, the bank said.
Source: Anadolu Agency
--Agencies
