World Bank Slashes Global Growth Forecast Amid Middle East Conflict
Published on June 12, 2026
A Deeper Dive into the World Bank's Latest Global Economic Projections
The World Bank has released its semi-annual 'Global Economic Prospects' report, revealing a significant reduction in the global economic growth forecast for 2026, now projected at 2.5%. This marks the lowest growth rate since the COVID-19 pandemic, primarily due to escalating conflicts in the Middle East, which have adversely affected economic expansion prospects worldwide.
Global Growth Forecast Trimmed Amid Geopolitical Headwinds
In 2025, global economic growth is expected to reach 2.9%, a slight increase from previous forecasts. However, the 2026 projection of 2.5% reflects a downward adjustment influenced by geopolitical tensions, particularly affecting countries reliant on energy exports, such as the UAE and Iraq.
Conflict Spillover and Escalating Risks
The ongoing conflict, which began with military actions by the US and Israel against Iran, has disrupted shipping lanes in the Strait of Hormuz, leading to rising oil prices and renewed inflationary pressures. This situation is prompting central banks to consider tightening monetary policies, while fertilizer prices are also increasing, raising concerns about a potential global food supply crisis.
Forecasting Models and Potential Scenarios
The World Bank has outlined three forecast models based on different market conditions. The baseline scenario predicts Brent crude oil prices averaging $94 per barrel, with inflation remaining at 4%. If supply disruptions continue, prices could rise to $115 per barrel, pushing inflation to 4.4% and reducing growth to 2.1%. The most pessimistic scenario could see growth plummet to 1.3% if the energy crisis impacts financial markets.
Long-Term Challenges and Economic Outlook
Looking ahead, global growth is projected to recover to 2.8% between 2027 and 2028, but this remains below the average growth of the 2010s. Factors such as slowing population growth, low investment levels, high government debt, and sluggish trade are hindering long-term recovery. The World Bank's Chief Economist, Indermit Gill, noted that the current economic resilience is weaker than in both 2008 and 2018.
Divergent Growth Performance Across Economies
Developing economies are particularly affected, with a projected growth rate of 3.6% in 2026, down from 4.4% in 2025. Most developing countries, except for China and India, are struggling to close the income gap with developed nations. The US is expected to grow at 2.2% in 2026, while the Eurozone and Japan face lower growth rates of 0.8% and 0.7%, respectively. India, however, is projected to maintain high growth rates of 6.6% in 2026.
Regions Facing Significant Headwinds
The Middle East and North Africa are particularly hard-hit, with a significant downgrade in growth forecasts for 2026. The UAE's growth is expected to drop from 5% to 2.4%, while Turkey's forecast is reduced to 2.8%. Countries reliant on oil exports, like Iraq, are also facing sharp declines in their economic outlook.