The World Bank’s latest Global Economic Prospects report says the ongoing conflict in the Middle East is expected to slow global economic growth to its lowest level since the COVID-19 pandemic.

A statement from the bank’s online media briefing centre on Thursday noted that this was due to higher energy prices, rising inflation, and increased borrowing costs, all of which are weighing on economies worldwide.

The report projected global growth to decline to 2.5 per cent in 2026 from 2.9 per cent in 2025, with growth forecasts for about two-thirds of economies downgraded from its January assessment.

It said global growth would improve slightly to 2.8 per cent in 2027 but remain 0.4 percentage points below the average growth rate recorded during the 2010s.

The report noted that weak growth in developing economies had stalled progress toward advanced economic income levels.

According to the report, developing economies, excluding China and India, are on course to experience nearly a decade without meaningful progress in closing their per capita income gap with advanced economies by 2028.

The World Bank Group president, Ajay Banga, said, “Developing countries have faced a series of challenges over the past decade. 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. Our job is to help countries steady the ship, keep reforms moving, and emerge on the other side.”

It said the World Bank was providing liquidity support where needed, and remained prepared to offer additional financing, guarantees and private-sector solutions should economic pressures intensify.

The report attributed much of the current economic strain to disruptions in global energy markets following the closure of the Strait of Hormuz. It projected Brent crude oil prices to average 94 dollars per barrel in 2026, representing a 36 per cent increase over 2025 levels, assuming the worst disruptions ease by July.

The report also forecasts significant increases in fertiliser prices, warning that higher input costs would further drive up global food prices.

As a result, global inflation is expected to rise to 4.0 per cent this year, up from 3.3 per cent in 2025, according to the report. It warned that risks to the outlook remained substantial.

If energy supply disruptions become more severe and trigger financial stress, global growth could fall further to 1.3 per cent in 2026, while inflation could rise  to 4.4 per cent, the report noted. 

The report said growth in developing economies was projected to drop to a post-pandemic low of 3.6 per cent in 2026 from 4.4 per cent in 2025, before recovering to 4.2 per cent in 2027.

(NAN)