World Bank cuts growth forecast

What's happened

The World Bank has cut its 2026 global growth forecast to 2.5% and has warned growth could fall to 1.3% if disruptions to oil and fertiliser flows from the Middle East persist. Rising energy and food costs are pushing inflation higher and hitting developing countries hardest; the bank has pledged up to $100bn in support.

What's behind the headline?

What the numbers mean

• The World Bank has lowered global growth to 2.5% for 2026 and has modelled a downside scenario of 1.3% if supply disruptions persist. That will slow recovery from the COVID shock and erase gains across many low- and middle-income countries.

Who loses and why

• Developing countries are bearing the brunt: higher fuel and fertiliser prices are lifting inflation and raising import bills while debt burdens are already elevated. The bank has noted that two-thirds of countries have seen downgraded forecasts.

Mechanisms that will transmit the shock

• Higher oil prices will raise transport and production costs and will lift headline inflation, which will force central banks to keep borrowing costs higher for longer.
• Fertiliser shortages will reduce farm yields, push food prices higher and worsen food insecurity in import-dependent nations.

Policy consequences

• The World Bank has made up to $100bn available; that will provide liquidity but will not erase higher debt-servicing costs. Governments will face a trade-off between shielding households and maintaining fiscal credibility.
• Higher global rates will make rolling over sovereign debt more expensive and will constrain public investment, slowing medium-term growth prospects.

Outlook and likely trajectory

• If the Strait of Hormuz reopens and energy flows normalise, commodity prices will fall and growth should rebound in 2027. If hostilities resume or logistics remain impaired, inflation will stay elevated and growth will drift toward the 1.3% downside scenario.

Bottom line

• The next quarter will determine whether this is a temporary shock or the start of a prolonged period of weak growth for many developing countries. Fiscal strain and higher borrowing costs will limit governments' ability to respond, prolonging the damage.

How we got here

The World Bank has downgraded forecasts after the US and Israel attacked Iran in February, prompting Iran to close the Strait of Hormuz and disrupting oil, gas and fertiliser shipments. Higher commodity prices have pushed global inflation up and strained developing-country finances.

Our analysis

The World Bank has set the tone. Its Global Economic Prospects report, cited across outlets including Al Jazeera and The Guardian, states: "global growth will slow to 2.5% this year" and warns growth could fall to 1.3% if supply disruptions worsen. The Guardian quotes World Bank president Ajay Banga saying governments must "protect people and preserve stability today, without giving up on growth and jobs tomorrow." AP News highlights regional divergence, noting the US forecast remains at 2.2% and that developing economies will see growth slow to 3.6%. The New York Times Business and Reuters-style briefings emphasise the link between the US‑Israeli attacks, Iran's closure of the Strait of Hormuz and the jump in oil and fertiliser prices; the Times reports the conflict has "fanned a new round of inflation," quoting the bank's projections that Brent crude will average about $94 a barrel. Independent Business and AP detail immediate market reactions — higher gasoline sales have supported US retail spending even as the Fed signals possible rate rises — showing how energy shocks transmit through consumption and monetary policy. Al Jazeera provides a market-angle on commodities, noting gold's fall as higher interest rates strengthen the dollar. Together the coverage shows a consensus on the economic mechanism (energy and fertiliser disruptions → higher prices → higher inflation → slower growth) while emphasising different national impacts and policy challenges.

Go deeper

• How will higher fertiliser prices affect food costs in my country over the next year?
• Which developing countries face the biggest fiscal stress from higher borrowing costs?
• How large is the World Bank's $100bn support and how quickly will it be deployed?

More on these topics

• World Bank - Bank

  The World Bank is an international financial institution that provides loans and grants to the governments of poorer countries for the purpose of pursuing capital projects.

• Iran (Islamic Republic of Iran) - Country in the Middle East

  Iran, also called Persia, and officially the Islamic Republic of Iran, is a country in Western Asia. It is bordered to the northwest by Armenia and Azerbaijan, to the north by the Caspian Sea, to the northeast by Turkmenistan, to the east by Afghanistan a

• United States - Country in North America

  The United States of America, commonly known as the United States or America, is a country mostly located in central North America, between Canada and Mexico.

• Israel - Country in the Middle East

  Israel, formally known as the State of Israel, is a country in Western Asia, located on the southeastern shore of the Mediterranean Sea and the northern shore of the Red Sea.

• Strait of Hormuz - Strait

  The Strait of Hormuz is a strait between the Persian Gulf and the Gulf of Oman. It provides the only sea passage from the Persian Gulf to the open ocean and is one of the world's most strategically important choke points.

• Middle East - Region

  The Middle East is a transcontinental region that generally includes Western Asia, all of Egypt, Iran, and Turkey. Soviet Central Asia, Afghanistan, and Pakistan are generally excluded.

• Ajaypal Singh Banga - Indian executive

  Ajaypal Singh Banga is an Indian-American business executive. He is currently executive chairman of Mastercard, having previously served as president and chief executive officer of the company from July 2010 until December 31, 2020.