# Middle East Conflict to Push Global Growth to Lowest Rate Since COVID-19

- Link: https://www.thailand-business-news.com/economics/313934-middle-east-conflict-to-push-global-growth-to-lowest-rate-since-covid-19
- Published: 2026-06-11T20:31:00+07:00
- Author: Nadjib Mohamed

**WASHINGTON, June 11, 2026**—The conflict in the Middle East is expected to slow
global growth to the lowest rate since the onset of the COVID-19 pandemic amid higher
energy prices, steeper inflation, and increased borrowing costs, according to the
World Bank Group’s latest _Global Economic Prospects_ report.

## Summary

 * The Middle East conflict is projected to slow global economic growth to 2.5% 
   in 2026, the lowest rate since the COVID-19 pandemic, according to the World 
   Bank Group’s latest Global Economic Prospects report. Disruptions to energy markets,
   rising inflation, and increased borrowing costs are the primary drivers.
 * Developing economies are expected to be hit hardest, with growth falling to a
   post-pandemic low of 3.6% in 2026. Gulf economies face near-zero growth, while
   rising debt levels and commodity price volatility continue to weaken fiscal positions
   across low-income countries. The World Bank Group has made up to $60 billion 
   immediately available in response.

Global growth is forecast to slow to 2.5% in 2026, down from 2.9% in 2025. Forecasts
for two-thirds of economies have been downgraded relative to January of this year.
Global growth is expected to improve to 2.8% in 2027 but will remain 0.4 percentage
point below the average during the 2010s. Weak growth in developing economies has
stalled progress toward advanced-economy income levels. By 2028, developing economies
other than China and India will have collectively experienced nearly a decade of
no progress on narrowing their per capita income gap with advanced economies, the
report finds. 

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_“Developing countries have faced a series of challenges over the last decade,” 
_said **Ajay Banga, President of the World Bank Group**._ “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.”_ 
> **Ajay Banga, President of the World Bank Group**

According to the report, the closure of the Strait of Hormuz has severely disrupted
energy markets, with Brent crude oil prices projected to average $94 a barrel in
2026, 36% above 2025 levels, assuming the worst disruptions abate in July. Fertilizer
prices are forecast to increase significantly this year, with knock-on effects for
food prices. Together, these pressures are pushing up global inflation, which is
expected to rise to 4.0% this year, up substantially from 3.3% in 2025.  

Yet downside risks are significant. 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% in 2026, and inflation would rise to 4.4%. 

This year, growth in developing economies is expected to drop to a post-pandemic
low of 3.6%, down from 4.4% in 2025, before recovering to 4.2% in 2027. Economies
in the Gulf that are directly affected by the conflict are expected to take the 
biggest hit as their growth tumbles from 3.9% in 2025 to close to zero in 2026. 
The report predicts growth will rebound in these economies—to about 5% in 2027–28—
as trade recovers and spending on reconstruction begins.  

The World Bank Group is committed to supporting all developing countries as they
confront crises. In response to the conflict in the Middle East, it is immediately
making up to $50–60 billion available through existing instruments, including $25
billion of pre-arranged financing. This can support social safety nets for the most
vulnerable people, boost fiscal capacity, and provide working capital and liquidity
support for firms and farms. To date, over 30 countries are actively working with
the World Bank Group to enhance readiness and enable a rapid response to the crisis
under this response plan. If the conflict and its economic fallout persist, the 
World Bank Group can scale up its support to $80–100 billion over 15 months.  

South Asia is expected to see the strongest growth of any region in 2026, but even
its growth will register a significant slowdown—from 7% in 2025 to 6.3% in 2026,
the report finds. Sub-Saharan Africa’s growth is also slowing, with the biggest 
pressures coming through inflation, including high food prices due to the fertilizer
supply shortages and price hikes. 

_“The conflict has taken a toll on global activity, but every crisis also brings
an opportunity,” _said **Ayhan Kose, the World Bank Group’s Deputy Chief Economist
and Director of the Prospects Group**._“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 report’s special-focus chapters examine fiscal challenges in developing economies.
About two-thirds of developing economies—and nearly 90% of low-income countries—
are commodity exporters. Yet these economies tend to have weaker fiscal positions
than other developing economies, as they face more volatile and less diversified
revenues. Five years after a positive commodity price shock, much of the revenue
windfall is spent, rather than saved to strengthen fiscal positions. To manage commodity
price volatility, policy makers should rely on frameworks, such as well-designed
fiscal rules and sovereign wealth funds with clear stabilization mandates, alongside
improved domestic revenue mobilization and greater economic diversification. 

The other chapter explores how rising debt levels are making it harder for countries
to respond to crises and invest in long-term development priorities—and driving 
up borrowing costs in the process. Since 2010, aggregate government debt in developing
economies has climbed from under 40% of GDP to over 70%. The analysis finds that
the more indebted a country already is, the more sharply its borrowing costs rise
with additional debt. The effect is particularly acute in more vulnerable countries.
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.  

## Regional Outlooks

_**East Asia and Pacific:**_ Growth is projected to fall to 4.2% in 2026 before 
firming to 4.4% in 2027. 

_**Europe and Central Asia:**_ Growth is forecast to slow to 2.1% in 2026 before
edging up to 2.3% in 2027. 

_**Latin America and the Caribbean:**_ Growth is expected to slow to 2.2% in 2026
before rising to 2.5% in 2027. 

_**Middle East, North Africa, Afghanistan, and Pakistan:**_ Growth is forecast to
drop to 1.6% in 2026 before recovering to 5.0% in 2027. 

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_**South Asia:**_ Growth is projected to fall to 6.3% in 2026 before rising to 6.9%
in 2027. 

_**Sub-Saharan Africa: **_Growth is expected to edge down to 4.0% in 2026 and rise
to 4.4% in 2027. 

_The World Bank Group is one of the world’s largest sources of funding and knowledge
for developing countries. For more than eight decades, the World Bank Group has 
combined financing and hands-on experience to create jobs and opportunities in developing
countries. We work with public and private partners to build more resilient economies—
and achieve our vision of a world free of poverty on a livable planet. Our Knowledge
Bank replicates and scales proven solutions to tackle the world’s most pressing 
development challenges._