The World Bank Group's latest Global Economic Prospects report, released June 11, 2026, warns that the ongoing conflict in the Middle East is expected to drive global growth to its lowest rate since the onset of the COVID-19 pandemic. The report projects global gross domestic product growth of just 2.5 percent in 2026, down sharply from 2.9 percent in 2025, as higher energy prices, elevated inflation, and increased borrowing costs weigh on economic activity worldwide.
According to the report, forecasts for two-thirds of economies have been downgraded relative to January 2026 projections. Global growth is expected to improve modestly to 2.8 percent in 2027 but will remain 0.4 percentage point below the average during the 2010s. The World Bank noted that weak growth in developing economies has stalled progress toward narrowing the per capita income gap with advanced economies. By 2028, developing economies other than China and India will have collectively experienced nearly a decade of no progress on closing this income divide.
The closure of the Strait of Hormuz has severely disrupted global energy markets, the report says. Brent crude oil prices are projected to average $94 per barrel in 2026, representing a 36 percent increase above 2025 levels, assuming the worst disruptions abate by July. Fertilizer prices are also forecast to increase significantly, with cascading effects on global food prices. Together, these supply-side pressures are pushing global inflation to an estimated 4.0 percent in 2026, up substantially from 3.3 percent in 2025.
World Bank Group President Ajay Banga emphasized the institution's commitment to supporting affected countries. "Developing countries have faced a series of challenges over the last decade," Banga said. "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." The World Bank Group announced it is making up to $50-60 billion available through existing instruments, including $25 billion of pre-arranged financing. If the conflict persists, the institution can scale up support to $80-100 billion over 15 months.
The report highlights significant downside risks. 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 percent in 2026, while inflation would rise to 4.4 percent. Growth in developing economies is expected to drop to a post-pandemic low of 3.6 percent in 2026, down from 4.4 percent in 2025, before recovering to 4.2 percent in 2027.
Economies in the Gulf region directly affected by the conflict are expected to take the biggest hit, with growth tumbling from 3.9 percent in 2025 to near zero in 2026, before rebounding to approximately 5 percent in 2027-2028 as trade recovers and reconstruction spending begins. Regionally, South Asia is projected to grow at 6.3 percent in 2026, East Asia and Pacific at 4.2 percent, Sub-Saharan Africa at 4.0 percent, Latin America and the Caribbean at 2.2 percent, Europe and Central Asia at 2.1 percent, and the Middle East, North Africa, Afghanistan, and Pakistan region at just 1.6 percent.
A special chapter of the report examines rising debt levels in developing economies. Since 2010, aggregate government debt in these economies has climbed from under 40 percent of GDP to over 70 percent. The analysis finds that higher indebtedness sharply increases borrowing costs, particularly in more vulnerable countries, reducing fiscal space for investment in infrastructure, health, and education. The World Bank's Deputy Chief Economist Ayhan Kose noted that the current crisis also presents an opportunity to strengthen policy frameworks, invest in infrastructure, and mobilize private capital to support job creation at scale.
Sources: imf.org/worldbank.org
