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Due to the ongoing war in the Middle East, the World Bank on Thursday reduced its global growth forecast for 2026 to 2.5%. The bank said that if the disruptions in energy supply become more serious and create severe pressure in the financial markets, then growth may decline to only 1.3%. The bank said in its half-yearly report ‘Global Economic Prospects’ that global growth in 2025 was 2.9%, which is 0.2 percentage points more than the January estimate. Its forecast for 2026 is 0.1 percentage points lower than in January, which is the lowest since the Covid pandemic began in late 2019. At the same time, the World Bank has estimated India’s GDP growth to be 6.6 percent in the financial year 2027, which is less than the estimated 7.7 percent in the financial year 2026.
This prediction was made on America
There has been no cut in America’s estimates. The World Bank still expects the world’s largest economy to grow 2.2% this year. This is equal to the January estimate and slightly higher than the 2025 estimate of 2.1%. As a major energy producer, the world’s largest economy is in a stronger position than countries that import their oil and natural gas. Additionally, the American economy is benefiting from big tax cuts and rapid investment in Artificial Intelligence (AI). But common Americans are still troubled by the rising prices of petrol and other things.
Other economies are being more adversely affected. The World Bank is reducing its growth forecast for developing and emerging market countries by 0.4 percentage points to 3.6%, the lowest level since the pandemic. The bank said that disruptions in energy supplies and huge increases in energy prices due to conflicts in these countries have reduced confidence and weakened economic activity.
China’s estimate also reduced
The economic growth rate of China, the world’s second largest economy, is estimated to be 4.2% this year. This is less than the estimate of 5% for 2025 and 4.4% for this year made by the bank in January. India is once again expected to remain the world’s fastest growing large economy, with a growth rate of 6.6% this year; But this is much less than 7.7% by 2025. The collective growth rate of the 21 European countries that use the euro currency is estimated to be 0.8% this year, which is less than 1.4% in 2025.
Impact of war between Iran and Israel visible
Iran responded to the attacks by America and Israel by closing the Strait of Hormuz, through which one-fifth of the world’s oil and natural gas passes. Energy prices increased rapidly. The World Bank estimates that the price of benchmark Brent crude oil will average $94 per barrel this year, which is 36% higher than by 2025 and 50% higher than the bank’s forecast in January. The war has also affected the fertilizer business, a large part of which is exported through the Persian Gulf. This could lead to food shortages as farmers may reduce fertilizer use to avoid increased costs.
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