Middle East — The global economy is facing renewed pressure following disruptions in the Middle East, which have driven up energy prices and intensified inflation risks worldwide, according to the latest Global Economic Prospects report released by the World Bank Group.
The report projects global growth will slow to 2.5% in 2026, down from 2.9% in 2025, marking one of the weakest expansion rates in nearly two decades outside of a global recession period.
Energy Shock and Inflation Pressures
The World Bank attributes the slowdown to rising energy costs linked to supply disruptions, particularly in critical shipping routes. The report warns that higher oil and gas prices are feeding inflation and prompting tighter monetary policies in many economies.
Commodity prices are expected to rise by 22% in 2026, while Brent crude oil could average $94 per barrel, a sharp increase compared to 2025. European natural gas prices are also projected to climb by around 30%.
Warning of a “Lost Decade” for Developing Economies
In a stark warning, World Bank Chief Economist Indermit Gill cautioned that the 2020s risk becoming a “lost decade” for many developing countries.
The report highlights that nearly half of developing economies have failed since 2019 to close income gaps with advanced economies. By 2026, one-quarter of developing economies and half of fragile states are expected to remain poorer than they were before the COVID-19 pandemic.
Uneven global recovery
Growth in emerging markets and developing economies is forecast to slow to 3.6% in 2026, with weaker performance expected in countries outside China and India. The report also points to rising sovereign debt levels, which are increasing borrowing costs and limiting investment in infrastructure and public services.
Global trade growth is expected to decelerate to 2.9%, though AI-related demand and slightly lower U.S. tariffs are providing some support.
Risks and Long-Term Outlook
The World Bank warns that if energy disruptions worsen, global growth could fall to 1.3%, with severe consequences for food security affecting an additional 70 million people.
Despite short-term risks, the report identifies three key drivers for future growth: artificial intelligence, the global shift toward clean energy, and expanding regional trade agreements.
AI-driven productivity gains, in particular, are highlighted as a potential turning point that could reshape global economic performance in the 2030s.
Policy Urgency
The report calls for stronger global cooperation on energy and food security, alongside domestic reforms focused on fiscal discipline, revenue mobilization, and structural changes to revive private investment and job creation.
With 1.2 billion young people expected to enter the global workforce by 2035, the World Bank stresses that urgent policy action is needed to avoid prolonged stagnation.
