The World Bank’s latest Global Economic Prospects (GEP) report, released June 11, 2026, paints a stark picture of developing economies caught between record-high debt levels and intensifying commodity price volatility. Since 2010, aggregate government debt in developing economies has climbed from under 40 percent of GDP to over 70 percent, severely limiting fiscal space precisely when these nations need it most.
The report’s special-focus chapter on fiscal challenges reveals that about two-thirds of developing economies — and nearly 90 percent of low-income countries — are commodity exporters. Yet these same economies tend to have weaker fiscal positions than their peers, facing more volatile and less diversified revenue streams. Five years after a positive commodity price shock, the GEP finds that much of the revenue windfall is typically spent rather than saved, leaving countries exposed when prices reverse.
The current Middle East conflict has dramatically amplified these vulnerabilities. The closure of the Strait of Hormuz has driven Brent crude oil prices to a projected average of 4 per barrel in 2026, a 36 percent increase above 2025 levels. Fertilizer prices are forecast to rise significantly this year, with dangerous knock-on effects for food prices in import-dependent developing nations. Global inflation is now expected to reach 4.0 percent in 2026, up substantially from 3.3 percent in 2025.
In a joint statement issued May 29, the heads of the International Monetary Fund, World Bank Group, International Energy Agency, and World Trade Organization warned that global oil inventories are being drawn down at a record pace. “If shipping flows do not return to normal, continued rapid depletion of global oil inventories ahead of peak summer oil demand in the Northern Hemisphere would present increasing risks for fuel security, market conditions, and broader economic resilience,” the four institutional leaders stated.
The debt analysis in the GEP report finds a troubling dynamic: the more indebted a country already is, the more sharply its borrowing costs rise with additional debt. This effect is particularly acute in the most vulnerable economies. For countries with elevated debt-to-GDP ratios, reducing debt levels can yield meaningful financial rewards — greater fiscal space to invest in infrastructure, health, and education, fueling economic growth and job creation.
World Bank Group President Ajay Banga emphasized the institution’s readiness to respond. “We are providing liquidity where it is needed now — and we are ready with additional financing, guarantees, and private-sector solutions if pressures deepen,” Banga said, announcing up to 00 billion in available support over 15 months for affected countries.
Growth in developing economies is projected to drop to a post-pandemic low of 3.6 percent in 2026, down from 4.4 percent in 2025. The World Bank’s Deputy Chief Economist Ayhan Kose urged policymakers to use the current crisis as a catalyst: “This moment should be used to strengthen policy frameworks, invest in infrastructure, accelerate business-enabling reforms, and mobilize private capital to support job creation at scale.”
The GEP report recommends that commodity-exporting developing economies adopt well-designed fiscal rules and sovereign wealth funds with clear stabilization mandates, alongside improved domestic revenue mobilization and greater economic diversification to break the cycle of boom-and-bust fiscal management.
Sources: https://www.worldbank.org/en/news/press-release/2026/06/11/global-economic-prospects-june-2026-press-release, https://www.worldbank.org/en/news/statement/2026/05/29/joint-statement-by-the-heads-of-the-international-energy-agency-international-monetary-fund-world-bank-group-and-world-t
