The World Bank has lowered its global growth forecast to its lowest level since the pandemic, warning of the expanding economic impacts of the war in the Middle East on countries around the globe.
Worldwide growth is now forecast to drop to 2.5 percent in 2026, from 2.9 percent a year earlier, with headline inflation averaging four percent, the multilateral lender said in its Global Economic Prospects report on Thursday.
The US-Israel war on Iran has sent energy prices skyrocketing, causing steeper inflation with the potential for increased borrowing costs as central banks seek to tame the rampant price increases.
The World Bank said it was making up to $60 billion immediately available to developing countries, which have been hardest hit by the crisis. It said that the number could increase to $100 billion over 15 months.
“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,” said Ajay Banga, the bank’s president.
Growth forecasts for two-thirds of the world’s economies have been downgraded in the new report relative to January of this year.
And World Bank officials warned of the unequal nature of the shock, hitting low-income and developing countries harder than advanced economies.
Some of the countries to see the highest downward revisions to GDP growth included the United Arab Emirates, Saudi Arabia and Bangladesh.
‘War anywhere is bad’
Gill highlighted the series of shocks to hit the world economy in recent years, including the pandemic, the climate crisis, the Russia-Ukraine war, US President Donald Trump’s tariff wars and now the Iran war, as depleting countries’ economic resilience.
“The first thing is to end the conflict in Ukraine, in the Gulf, and in Central Africa, and not start any new wars,” he said.
“War anywhere is bad for poor people everywhere.”
The World Bank’s baseline scenario, upon which the forecast is based, assumes Brent crude prices will average $94 per barrel in 2026, with the worst of energy supply disruptions to abate by July.
