The World Bank has cut its global growth forecast and warned that developing economies risk a "lost decade" as the war involving Iran, the United States and Israel drives up energy costs, fuels inflation and threatens food security across large parts of the world.
In its latest Global Economic Prospects report, the World Bank said global growth is expected to slow to 2.5% in 2026, down from 2.9% this year, while inflation is projected to rise to 4%. The lender downgraded growth forecasts for roughly two-thirds of the world's economies, citing disruptions to energy markets and trade routes linked to the conflict.
The report assumes that disruptions to shipping and oil flows through the Strait of Hormuz ease in the coming months. However, the Bank warned that a renewed escalation of hostilities or prolonged interruptions to commodity flows could push global growth down to 1.3%, as The Guardian reports.
"Developing countries have faced a series of challenges over the last decade," World Bank President Ajay Banga said. "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."
The Bank said it would make up to $60 billion immediately available to countries most affected by the crisis, with support potentially rising to $100 billion over the next 15 months.
Chief Economist Indermit Gill said the effects of the conflict are being felt unevenly but are particularly severe across Asia and other regions dependent on imported energy, fertilizers and food supplies. Fertilizer prices are expected to rise by as much as 38% this year because of disruptions linked to the Strait of Hormuz, raising concerns about food costs and food security in vulnerable countries.
The report warned that, aside from India and China, many developing economies are on track to complete the 2020s without narrowing the income gap with advanced economies. "Barring a miracle," the report said, the decade could become a "lost decade" for dozens of developing countries.
The World Bank's warning follows a similar assessment by the Organisation for Economic Cooperation and Development earlier this month. The OECD said prolonged disruptions to Gulf energy supplies could push global growth even lower and increase inflation, particularly in countries with limited energy reserves, weak fiscal capacity and high dependence on imported food and fuel.
"War anywhere is bad for poor people everywhere," Gill said.
