UN lowers global growth forecast to 2.5% due to Middle East crisis
The United Nations lowered its forecast for global economic growth, saying the Middle East crisis had revived inflationary pressures and increased uncertainty. In its mid-year report on the World Economic Situation and Prospects, it said global GDP growth is forecast to be 2.5% in 2026, compared with an estimate of 3% in 2025, 0.2 percentage points below the January forecast and well below pre-pandemic growth rates. A modest recovery is forecast to 2.8% in 2027.
"What began as a shock to energy markets on February 28 has turned into a broader supply shock of uncertain scope, magnitude and duration that is spreading across the world," said Shantanu Mukherjee, Director of the Division of Economic Analysis and Policy at the UN Department of Economic and Social Affairs. "In a period of just 11 weeks, this has forced us to revise down our previous forecasts for global GDP growth to 2.5% in 2026 and 2.8% in 2027," he added.
"Strong labor markets, resilient consumer demand, and trade and investment driven by artificial intelligence are expected to provide support, but the decline underscores a further weakening of an already weak global outlook," the UN report said.
Rising energy prices have brought windfall profits to energy companies but have intensified cost pressures for households and businesses. Inflation is forecast to rise from 2.6% in 2025 to 2.9% in 2026 in advanced economies and from 4.2% to 5.2% in emerging economies.
Agricultural fertilizer supplies have been disrupted, raising costs, which could reduce crop yields, putting pressure on food prices. Global financial markets have remained resilient, but inflation expectations have pushed up short-term bond yields.
West Asia is most affected by the conflict in the Middle East, where growth is forecast to fall from 3.6% to 1.4%, exacerbated by damage to infrastructure, trade and tourism.
Europe is most exposed, with its dependence on imported energy weighing on households and businesses. The EU's economic growth is forecast to slow from 1.5% to 1.1% and in the UK from 1.4% to 0.7%.
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