The ongoing conflict in the Middle East is expected to significantly weaken the global economy, pushing growth to its slowest pace since the COVID-19 pandemic, according to the World Bank Group’s latest Global Economic Prospects report, DKNews.kz reports.
Higher energy prices, rising inflation and increased borrowing costs are expected to weigh on economic activity worldwide, while uncertainty surrounding the conflict continues to pose substantial risks.
Global growth forecast downgraded
The World Bank now expects global economic growth to slow to 2.5% in 2026, compared with 2.9% in 2025.
While growth is projected to recover slightly to 2.8% in 2027, it will remain below the average recorded during the 2010s.
The report notes that forecasts for two-thirds of economies have been downgraded since January.
Particularly concerning is the impact on developing countries, where progress toward narrowing income gaps with advanced economies has stalled.
According to the report, by 2028 developing economies excluding China and India will have experienced nearly a decade without meaningful progress in closing the per capita income gap with advanced economies.
Energy shock drives inflation higher
One of the key factors behind the weaker outlook is the disruption to global energy markets following the closure of the Strait of Hormuz.
The World Bank projects Brent crude oil prices to average $94 per barrel in 2026, representing a 36% increase compared with 2025 levels, assuming major disruptions ease during July.
The report also forecasts significant increases in fertilizer prices, which could place additional pressure on global food markets.
As a result:
- global inflation is expected to rise to 4.0% in 2026
- inflation stood at 3.3% in 2025
- higher food and energy costs are expected to affect both households and businesses
Severe scenario could trigger sharper slowdown
The World Bank warned that risks remain heavily tilted to the downside.
If energy supply disruptions become more severe and are accompanied by financial market stress:
- global growth could slow to just 1.3% in 2026
- inflation could rise to 4.4%
Such a scenario would create additional challenges for governments already dealing with elevated debt levels and weaker economic activity.
Developing economies face mounting pressures
Growth in developing economies is expected to slow sharply from 4.4% in 2025 to 3.6% in 2026 before recovering to 4.2% in 2027.
The report identifies Gulf economies directly affected by the conflict as among the hardest hit.
Their growth is forecast to decline from 3.9% in 2025 to nearly zero in 2026 before rebounding to around 5% in 2027–2028 as trade normalizes and reconstruction efforts begin.
South Asia is expected to remain the fastest-growing region in the world, although growth there is also projected to slow from 7% in 2025 to 6.3% in 2026.
Meanwhile, Sub-Saharan Africa faces increasing inflationary pressures, particularly from higher food prices linked to fertilizer shortages and rising agricultural costs.
World Bank pledges up to $100 billion in support
In response to the crisis, the World Bank Group announced plans to provide substantial financial support to developing countries.
The institution is making up to $50–60 billion available immediately through existing financing instruments, including $25 billion in pre-arranged financing.
The support can be used for:
- social protection programs
- strengthening fiscal capacity
- liquidity support for businesses
- working capital for farms and companies
More than 30 countries are already working with the World Bank Group to prepare rapid-response measures.
If the conflict and its economic consequences continue, total support could increase to between $80 billion and $100 billion over a 15-month period.
Officials call for reforms and resilience
World Bank Group President Ajay Banga stressed the importance of balancing immediate crisis management with long-term development goals.
«Developing countries have faced a series of challenges over the last decade. 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. 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. Our job is to help countries steady the ship, keep reforms moving, and emerge stronger on the other side.»
World Bank Deputy Chief Economist Ayhan Kose said the crisis should also be viewed as an opportunity to strengthen economic foundations.
«The conflict has taken a toll on global activity, but every crisis also brings an opportunity. 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.»
Debt and commodity dependence remain key concerns
The report’s special chapters highlight growing fiscal challenges in developing economies.
Key findings include:
- nearly two-thirds of developing economies are commodity exporters
- almost 90% of low-income countries depend heavily on commodity exports
- government debt in developing economies has risen from below 40% of GDP in 2010 to more than 70% today
The World Bank notes that higher debt levels increase borrowing costs and reduce governments’ ability to respond to crises or invest in long-term priorities such as infrastructure, healthcare and education.
The report recommends stronger fiscal rules, sovereign wealth funds, improved revenue collection and greater economic diversification to enhance resilience against future shocks.
Why this matters
The World Bank’s latest outlook highlights how geopolitical conflicts can rapidly affect the global economy through energy prices, inflation and financial markets.
For developing economies, the challenge is particularly acute as slower growth, higher borrowing costs and mounting debt burdens threaten progress on development goals. The report underscores the importance of economic diversification, fiscal discipline and international cooperation in navigating an increasingly uncertain global environment.
