Share Story
AMMAN — The ongoing conflict in the Middle East is expected to slow global economic growth to its weakest pace since the COVID-19 pandemic, as surging energy prices fuel inflation and raise borrowing costs worldwide, according to the World Bank Group’s latest Global Economic Prospects report.
The report forecasts global growth to slow to 2.5 per cent in 2026 from 2.9 per cent in 2025, with growth projections downgraded for nearly two-thirds of the world’s economies since January. Although growth is expected to recover slightly to 2.8 per cent in 2027, it will remain 0.4 percentage points below the average recorded during the 2010s.
The World Bank warned that weak growth in developing countries is undermining efforts to close income gaps with advanced economies. By 2028, developing economies excluding China and India are projected to have experienced nearly a decade without meaningful progress in narrowing per capita income disparities with wealthier nations.
“Developing countries have faced a series of challenges over the last decade,” said Ajay Banga, President of the World Bank Group.
“The impact differs by country, but the basic test is the same: protect people and preserve stability today, without giving up on growth and jobs tomorrow,” Banga said. “In response to the current shock, we are providing liquidity where it is needed now, and we are ready with additional financing, guarantees and private-sector solutions if pressures deepen.”
According to the report, the closure of the Strait of Hormuz has severely disrupted global energy markets. Brent crude oil prices are projected to average $94 per barrel in 2026, a 36 per cent increase over 2025 levels, assuming major disruptions ease by July.
Fertiliser prices are also expected to rise sharply, increasing pressure on global food markets. As a result, global inflation is forecast to climb to 4 per cent this year, up from 3.3 per cent in 2025.
The report cautioned that risks remain heavily tilted to the downside. Should energy supply disruptions worsen and trigger significant financial market stress, global growth could fall to just 1.3 per cent in 2026, while inflation could accelerate to 4.4 per cent.
Growth in developing economies is expected to slow to 3.6 per cent in 2026, marking the lowest level since the pandemic, compared with 4.4 per cent in 2025. The report projects a recovery to 4.2 per cent in 2027.
Among the hardest-hit regions are Gulf economies directly affected by the conflict. Their growth is expected to fall from 3.9 per cent in 2025 to nearly zero in 2026 before rebounding to around 5 per cent in 2027 and 2028 as trade resumes and reconstruction efforts gain momentum.
To help countries manage the crisis, the World Bank Group announced that it is making up to $60 billion available through existing financing instruments, including $25 billion in pre-arranged funding. The support is intended to strengthen social safety nets, boost fiscal capacity and provide liquidity for businesses and farms.
More than 30 countries are already working with the World Bank Group to enhance preparedness and enable rapid responses under the initiative. The institution said support could be expanded to between $80 billion and $100 billion over 15 months if the conflict and its economic consequences persist.
Despite remaining the world’s fastest-growing region, South Asia is also expected to experience a slowdown, with growth easing from 7 per cent in 2025 to 6.3 per cent in 2026. Sub-Saharan Africa is similarly expected to face mounting pressures from inflation and rising food costs linked to fertiliser shortages and higher prices.
“The conflict has taken a toll on global activity, but every crisis also brings an opportunity,” said Ayhan Kose, the World Bank Group’s Deputy Chief Economist and Director of the Prospects Group.
“This moment should be used to strengthen policy frameworks, invest in infrastructure, accelerate business-enabling reforms and mobilise private capital to support job creation at scale,” he said.
The report also highlighted persistent fiscal challenges facing commodity-exporting developing economies. “Nearly two-thirds of developing countries and almost 90 per cent of low-income countries depend heavily on commodity exports, making them particularly vulnerable to price volatility.”
While commodity booms can generate substantial revenue windfalls, the report noted that much of the additional income is often spent rather than saved.
The World Bank urged policymakers to strengthen fiscal frameworks through well-designed fiscal rules, sovereign wealth funds, improved domestic revenue mobilisation and greater economic diversification to better manage future shocks.
