World Bank Downgrades Global Growth Estimate for 2026
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 recent statement from the bank’s Online Media Briefing Centre noted that this was as higher energy prices, rising inflation and increased borrowing costs weigh 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.
It quoted World Bank Group President, Ajay Banga, as saying “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.”
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 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.
It said Gulf economies directly affected by the conflict would suffer the largest setback, with growth expected to drop from 3.9 per cent in 2025 to near zero in 2026.
“However, growth in those economies is forecast to rebound to about five per cent during 2027 and 2028 as trade resumes and reconstruction spending begins.”
The report said the bank had made between 50 billion and 60 billion dollars available through existing financing instruments to help developing countries manage the crisis.
It said the support package includes 25 billion dollars in pre-arranged financing for social safety nets, fiscal support and liquidity assistance for businesses and farms.
According to the report, more than 30 countries are already working with the World Bank to strengthen preparedness and facilitate rapid responses under the response plan.
It said the bank could increase support to between 80 billion and 100 billion dollars over a 15-month period if the conflict and its economic consequences persisted.
Regionally, the report said South Asia was expected to remain the fastest-growing area in 2026, although growth is projected to slow from seven per cent in 2025 to 6.3 per cent.
It said Sub-Saharan Africa was also expected to experience slower growth, largely due to inflationary pressures, including rising food prices linked to fertiliser shortages and higher costs.
Ayhan Kose, the World Bank’s Deputy Chief Economist and Director of the Prospects Group, said the crisis also presented an opportunity for policy reforms.
“The conflict has taken a toll on global activity, but every crisis also brings an opportunity.
“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,” the report added Irish Economy to Grow at Slow Pace with Upside Inflation Risk -IMF
