The World Bank has lowered its global growth forecast to its weakest level since the Covid-19 pandemic, warning that the economic fallout from the conflict in West Asia is spreading well beyond the region and putting additional pressure on countries around the world.
In its latest Global Economic Prospects report released on Thursday, the global lender projected world economic growth of 2.5 per cent in 2026, down from 2.9 pc a year earlier. Global inflation is expected to average 4 pc, reflecting continued price pressures across many economies.
The downgrade comes as rising energy costs linked to the US-Israeli war with Iran continue to ripple through global markets, with higher energy prices leading to surging inflation, as well as increasing the risk of central banks keeping interest rates elevated for longer periods of time or otherwise tightening their monetary policies for further containment of price growth.
It further warned that developing economies were the ones bearing the brunt of this crisis, due to facing higher import costs, weaker growth prospects and increasing pressure on public finances.
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To help cushion the impact, the institution said it was making up to USD $60 billion available immediately for developing countries. That figure could possibly rise to as much as US$100 billion over the next 15 months, depending on demand and evolving economic conditions.
As per the latest report, growth projections for around two-thirds of all economies have been revised down since the World Bank’s previous assessment in January.
The bank said geopolitical tensions, ongoing conflicts and uncertainty in global markets continue to weigh heavily on investment, trade and consumer confidence.
Indermit Gill, the institution’s chief economist, said ending conflicts would be one of the most effective ways to improve economic prospects, particularly for the more vulnerable and poorer countries that often suffer the greatest consequences despite being far removed from the fighting.
“The first thing is to end the conflict in Ukraine, in the Gulf, and in Central Africa, and not start any new wars,” Gill said.
“War anywhere is bad for poor people everywhere.”
