THE World Bank yesterday cut its global growth forecast for 2026 to 2.5 per cent due to the war in the Middle East, and said growth could slow to just 1.3pc if energy supply disruptions prove more severe and come with substantial stress in financial markets.
Global growth reached 2.9pc in 2025, the bank said in its semi-annual Global Economic Prospects, up 0.2 percentage point from its estimate in January. Its 2026 forecast is down 0.1 percentage point from January, the lowest seen since the Covid pandemic that began in late 2019.
The bank lowered forecasts for two-thirds of countries as a result of the war, with the biggest cuts affecting the UAE, Iraq and other countries in the Middle East whose energy exports have been hit hard by the conflict.
The World Bank’s stark outlook comes as the war launched by US and Israeli strikes on Iran on February 28 drags into a fourth month. It has sent energy prices up sharply due to the closure of the Strait of Hormuz, renewed inflationary pressures worldwide and fuelled expectations of tighter monetary policy across many countries.
Fertiliser prices are also up sharply, raising concerns about a major food supply crisis.
The World Bank said its baseline forecast assumed an average Brent crude oil price of $94 for the year, up 36pc from 2025, and that the worst disruptions to energy supplies would abate by the end of July, with global headline inflation seen at 4pc.
It said growth could slow to 2.1pc if the energy disruptions lasted longer and oil prices averaged $115 per barrel this year, which could drive inflation to 4.4pc. The outlook would worsen further, with growth decelerating to just 1.3pc, if the energy shock affected financial markets, resulting in lower energy prices, greater volatility and weaker confidence, it said.
Global growth is expected to improve to 2.8pc in 2027 and 2028, but that remains 0.4 percentage point below the average rates seen during the 2010s due to a slew of factors, including slower population growth, slower private investment growth, falling public investment, rising public debt and slower growth in trade, World Bank chief economist Indermit Gill said.
Weak growth in developing economies has stalled progress towards advanced-economy income levels, with dozens of developing countries other than China and India looking at a “lost decade” in which they saw no progress on narrowing their per capita income gap with advanced economies, the report said.
Developing economies have been hit harder by the war, with the bank now projecting growth at a post-pandemic low of 3.6pc this year, down from 4.4pc in 2025, the bank said.
The bank maintained its forecast of 2.2pc growth in the US economy in 2026, but said that could taper off to 2.1pc in 2027 and 2pc in 2028. The euro area was expected to grow by 0.8pc in 2026, down from 1.4pc in 2025. Japan’s GDP was forecast to grow 0.7pc in 2026, down from 1.1pc in 2025.
The World Bank forecast GDP growth of 4.2pc in China in 2026, a downward revision of 0.2 percentage point, after 5pc growth in 2025.
It slashed its forecast for GDP growth in the Middle East, North Africa, Afghanistan and Pakistan by 2.7 percentage points to 1.6pc in 2026, down from 4pc in 2025, but said growth in the region could rebound to 5pc in 2027.
The UAE was expected to see growth of 2.4pc in 2026, down sharply from the January forecast of 5pc and the 2025 rate of 6.2pc. The bank also lowered Turkey’s 2026 GDP growth forecast by 0.9 percentage point to 2.8pc.
The World Bank said India remained the fastest-growing large economy in the world, with its GDP seen growing by 6.6pc in 2026, after growth of 7pc in 2025. Growth rates in India were expected to remain fairly high for the next two decades, Gill said.
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