Global growth is forecast to slow to 2.5 per cent in 2026, down from 2.9 per cent in 2025.
The Iran war is expected to slow global growth to the lowest rate since the COVID-19 pandemic, the World Bank has said.
Global growth is forecast to slow to 2.5 per cent in 2026 from 2.9 per cent in 2025.
Forecasts for two-thirds of economies have been downgraded relative to January 2026.
This year, growth in developing economies is expected to drop to a post-pandemic low of 3.6 per cent.
Forecasts for two-thirds of economies have been downgraded relative to January 2026.
Global growth is expected to improve to 2.8 per cent in 2027, but will remain 0.4 percentage point (pp) below the average during the 2010s.
Weak growth in developing economies has stalled progress toward advanced-economy income levels. By 2028, developing economies other than China and India will have collectively experienced nearly a decade of no progress on narrowing their per capita income gap with advanced economies, the report noted.
“Developing countries have faced a series of challenges over the last decade,” said Ajay Banga, president of the World Bank Group.
The closure of the Strait of Hormuz has severely disrupted energy markets, with Brent crude oil prices projected to average $94 a barrel in 2026, 36 per cent above 2025 levels, assuming the worst disruptions abate in July.
Fertiliser prices are forecast to increase significantly this year, with knock-on effects for food prices. Together, these pressures are pushing up global inflation, which is expected to rise to 4 per cent this year—up substantially from 3.3 per cent in 2025.
Yet downside risks are significant. If energy supply disruptions prove more severe than currently assumed and are accompanied by substantial financial stress, global growth could fall to just 1.3 per cent in 2026, and inflation would rise to 4.4 per cent, said the report.
This year, growth in developing economies is expected to drop to a post-pandemic low of 3.6 per cent, down from 4.4 per cent in 2025, before recovering to 4.2 per cent in 2027.
Economies in the Gulf that are directly affected by the conflict are expected to take the biggest hit as their growth tumbles from 3.9 per cent in 2025 to close to zero in 2026. The report predicted that growth will rebound in these economies—to about 5 per cent in 2027-28—as trade recovers and spending on reconstruction begins.
In response to the conflict in the Middle East, the World Bank Group is immediately making up to $50-60 billion available through existing instruments, including $25 billion of pre-arranged financing. This can support social safety nets for the most vulnerable people, boost fiscal capacity and provide working capital and liquidity support for firms and farms.
South Asia is expected to see the strongest growth of any region in 2026, but even its growth will register a significant slowdown—from 7 per cent in 2025 to 6.3 per cent in 2026, the report notes.
Sub-Saharan Africa’s growth is also slowing, with the biggest pressures coming through inflation, including high food prices due to the fertiliser supply shortages and price hikes.
Fibre2Fashion News Desk (DS)
