World Bank cuts global growth forecast due to Middle East war

The World Bank has significantly reduced its global economic growth forecast for 2026 to 2.5%, the lowest since the COVID-19 pandemic, attributing the downturn primarily to the expanding effects of the war in the Middle East. This projection marks a decrease from the previous year's 2.9% growth, with global inflation expected to average 4%.

The conflict has triggered a surge in energy prices, exacerbating inflation and raising concerns about increased borrowing costs as central banks strive to curb rising prices. In response to the escalating crisis, the World Bank announced it is immediately releasing up to $60 billion in liquidity for the most severely impacted developing nations. This figure could potentially rise to $100 billion over the next 15 months.

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In response to the current shock, we are providing liquidity where it is needed now, and we are prepared with additional financing, guarantees, and private sector solutions if pressures intensify.

Ajay Banga, president of the World Bank, stated, “In response to the current shock, we are providing liquidity where it is needed now, and we are prepared with additional financing, guarantees, and private sector solutions if pressures intensify.” The report indicates that growth forecasts have been revised downward for two-thirds of the world's economies since January.

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Asia is the part most affected of the economy global. Asia Occidental is being hit by the conflict. Asia Meridional is affected by the higher prices of oil, the gas, the minerals and the fertilizers. The Southeast Asia, countries like Philippines, are suffering for the higher prices of fuels and minerals, and the Northeast Asia also is experiencing these effects.

Economists at the World Bank highlighted the uneven impact of the current economic shock, noting that low-income and developing countries are disproportionately affected compared to advanced economies. Asia, in particular, is experiencing significant repercussions. Indermit Gill, chief economist of the World Bank, explained that Western Asia is grappling with the conflict, while South and Southeast Asia face challenges from higher prices for oil, gas, minerals, and fertilizers. Latin America and the Caribbean are experiencing a less severe impact, with their growth forecast reduced to 2.2% from a January prediction of 2.3%.

Gill also pointed to a series of interconnected shocks in recent years, including the pandemic, climate change, the war in Ukraine, trade disputes, and the current Middle East conflict, as factors that have diminished the economic resilience of nations. He emphasized the need to end ongoing conflicts and avoid initiating new ones.

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The first thing is to end the conflict in Ukraine, in the Gulf and in Central Africa, and not start new wars.