World Bank Sees Global Growth Slowing to 2.5% in 2026, Lowest Since Covid-19
Summary
- The World Bank said global economic growth will slow to 2.5%% in 2026 as conflict in the Middle East and rising energy prices weigh on the outlook.
- It said surging Brent crude prices and fertilizer prices will push global inflation to 4.0%% this year, and in a worst-case scenario growth could slow to 1.3%% while inflation rises to 4.4%%.
- It said developing economies and the Gulf region will see economic growth fall to the lowest level since the Covid-19 pandemic, but projected that economic activity will remain solid in 2027 and 2028 as energy supply recovers and monetary easing resumes.
Forecast Trend Report by Period
The World Bank said the global economy will slow to its weakest pace since the Covid-19 pandemic as conflict in the Middle East and rising energy prices weigh on growth.
In a report released June 11, the World Bank projected global growth of 2.5% in 2026, down from 2.9% in 2025. It said that would mark the lowest level since the pandemic.
The bank lowered this year's growth forecasts for about two-thirds of economies from the projections it issued in January.
It said energy prices jumped after the Strait of Hormuz was shut following the Iran war, reigniting inflation pressure. The bank added that expectations are growing that central banks will strengthen tightening, including through interest-rate increases.
Assuming the worst disruption eases in July, Brent crude is projected to average $94 a barrel this year, up 36% from last year, according to the World Bank. Fertilizer prices are also forecast to rise sharply this year.
Those factors are pushing up global inflation, the bank said. It forecasts inflation at 4.0% this year, up from 3.3% last year.
The World Bank added that if energy supply disruptions worsen beyond current expectations and trigger financial-market instability, global growth could fall to 1.3% this year while inflation could rise to 4.4%.
Among major economies, US growth is projected to edge up to 2.2% this year from 2.1% last year.
Japan's growth is forecast to slow to 0.7% this year from 1.1% last year as consumption and exports weaken. China's economy is projected to expand 4.2% this year, down from 5.0% last year, amid a property-market correction and slower consumption growth.
South Korea was not included in the report.
Growth in East Asia and the Pacific is projected at 4.2% this year and 4.4% next year.
Developing economies are forecast to slow to 3.6% this year from 4.4% last year, the weakest since the Covid-19 pandemic, before recovering to 4.2% next year.
The Gulf region, which is directly affected by the Middle East conflict, is expected to suffer the biggest hit. The bank projected growth there will plunge from 3.9% last year to near zero this year.
Still, the World Bank said economic activity should remain solid in 2027 and 2028 as energy supply recovers, monetary easing resumes and trade picks up.
Lee Bo-bae, guest reporter at Hankyung.com, newsinfo@hankyung.com
Korea Economic Daily
hankyung@bloomingbit.ioThe Korea Economic Daily Global is a digital media where latest news on Korean companies, industries, and financial markets.
