The World Bank cut its growth forecasts for two thirds of economies because of fallout from the Iran war, and projected the world economy to expand 2.5% in 2026, down from 2.9% in 2025 and below the 2.6% it forecast in January, warning that growth could fall to 1.3% if energy supply disruptions proved more severe and were accompanied by substantial financial stress.
The bank said the conflict was slowing growth through higher energy prices, steeper inflation and increased borrowing costs, with the closure of the Strait of Hormuz severely disrupting energy markets; it projected Brent crude to average $94 a barrel in 2026, 36% above 2025 levels, assuming the worst disruptions abate in July. Growth in developing economies was expected to drop to a post-pandemic low of 3.6% in 2026 from 4.4% in 2025, while Gulf economies directly affected by the conflict were expected to see growth tumble from 3.9% in 2025 to close to zero.
IMPACT CHANNELS
The report forecast a significant rise in fertiliser prices this year, with knock-on effects for food prices, and global inflation rising to 4.0% in 2026 from 3.3% in 2025.
"The impact differs by country," World Bank Group President Ajay Banga said. A special-focus chapter found that about two-thirds of developing economies, and nearly 90% of low-income countries, are commodity exporters, and that these economies tend to have weaker fiscal positions because their revenues are more volatile and less diversified.
IMPLICATIONS FOR AFRICAN ECONOMIES
The bank expected Sub-Saharan Africa's growth to edge down to 4.0% in 2026 before rising to 4.4% in 2027. It said the biggest pressures on the region were coming through inflation, including high food prices due to fertiliser supply shortages and price hikes.
Banga said the basic test for countries was to "protect people and preserve stability today, without giving up on growth and jobs tomorrow."
The report found that aggregate government debt in developing economies had climbed from under 40% of GDP in 2010 to over 70%, and that the more indebted a country already is, the more sharply its borrowing costs rise with additional debt.
The World Bank Group said it was immediately making up to $50–60 billion available through existing instruments, including $25 billion of pre-arranged financing, and could scale up support to $80–100 billion over 15 months if the conflict and its fallout persisted.
The bank expected global growth to improve to 2.8% in 2027, which would still be 0.4 percentage point below the average of the 2010s.
Sources: World Bank; Moneyweb
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