Washington: 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 announced Thursday. The bank's latest Global Economic Prospects report projects global growth to decline to 2.5% in 2026, a decrease from 2.9% in 2025, driven by higher energy prices, increased inflation, and elevated borrowing costs.
According to Anadolu Agency, the World Bank has downgraded growth forecasts for two-thirds of economies compared to earlier predictions in January. While global growth is projected to improve to 2.8% in 2027, it is anticipated to remain 0.4 percentage points below the average recorded during the 2010s. The report highlights that the closure of the Strait of Hormuz has significantly disrupted energy markets, with Brent crude oil prices expected to average $94 per barrel in 2026, marking a 36% increase over 2025 levels.
The report also notes a significant rise in fertilizer prices this year, leading to further increases in food prices. These pressures are anticipated to push global inflation to 4.0% in 2026 from 3.3% in 2025. The World Bank warns of considerable downside risks, stating that if energy supply disruptions worsen and are coupled with financial stress, global growth could plummet to 1.3% in 2026, with inflation potentially rising to 4.4%.
Developing economies are expected to experience a post-pandemic low growth rate of 3.6% in 2026, down from 4.4% in 2025, before a recovery to 4.2% in 2027. The Gulf economies, directly impacted by the conflict, are predicted to see the most severe slowdown, with growth dropping from 3.9% in 2025 to nearly zero in 2026. However, growth in these regions is forecast to rebound to approximately 5% in 2027-2028 as trade recovers and reconstruction efforts commence.
The World Bank Group has indicated its readiness to scale up support, immediately making $50 billion-$60 billion available through existing mechanisms in response to the conflict, including $25 billion in pre-arranged financing. This support aims to bolster social safety nets, fiscal capacity, and provide working capital and liquidity support for businesses and agriculture. Over 30 countries are actively collaborating with the World Bank Group to enhance their crisis response readiness. The bank is prepared to increase support to $80 billion-$100 billion over 15 months if the conflict and its economic impacts persist.
Regionally, South Asia is expected to record the strongest growth in 2026, albeit slowing to 6.3% from 7.0% in 2025. Sub-Saharan Africa's growth is anticipated to dip to 4.0% in 2026 before rising to 4.4% in 2027, primarily due to 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 increasing to 4.4% in 2027. Europe and Central Asia are forecast to slow to 2.1% in 2026, edging up to 2.3% in 2027. Latin America and the Caribbean are expected to grow by 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 rebounding to 5.0% in 2027.
The report further warns that rising debt levels are complicating efforts for developing economies to respond to crises and invest in long-term development priorities. Since 2010, aggregate government debt in these economies has increased from below 40% of GDP to more than 70%.