The United Nations on Tuesday lowered its forecast for global economic growth, warning that the crisis in the Middle East had revived inflationary pressures and increased uncertainty across the global economy.
According to a UN press release summarising the mid-year update to its World Economic Situation and Prospects report, global gross domestic product growth is projected at 2.5 per cent in 2026, down from an estimated 3.0 per cent in 2025.
The latest projection is 0.2 percentage points lower than the forecast issued in January and remains well below growth levels recorded before the Covid-19 pandemic.
Inflation pressures intensify
The UN expects a modest recovery in 2027, with global growth forecast at 2.8 per cent.
It said resilient labour markets, steady consumer demand and artificial intelligence-driven trade and investment activity were expected to support the global economy. However, the downgrade reflected continued weakness in the overall outlook.
A sharp rise in energy prices has generated windfall profits for energy companies while increasing financial pressure on households and businesses.
In developed economies, inflation is forecast to rise from 2.6 per cent in 2025 to 2.9 per cent in 2026. In developing economies, inflation is expected to increase from 4.2 per cent to 5.2 per cent.
The report also noted that disruptions to fertiliser supplies had pushed up costs, potentially affecting crop yields and placing further upward pressure on food prices.
Regional growth outlook varies
Global financial markets have remained relatively resilient, although higher inflation expectations have pushed short-term bond yields upwards.
The UN said Western Asia was expected to experience the most severe impact, with economic growth projected to plunge from 3.6 per cent to 1.4 per cent due to damage affecting infrastructure, trade and tourism.
The United States is forecast to remain comparatively resilient, with growth projected at 2.0 per cent in 2026, broadly unchanged from 2025, supported by strong household demand and technology investment.
Europe faces greater exposure
Europe is expected to face greater challenges because of its dependence on imported energy, which has placed added strain on households and businesses.
Economic growth in the European Union is projected to slow from 1.5 per cent to 1.1 per cent, while Britain’s growth is expected to weaken from 1.4 per cent to 0.7 per cent.
China’s diversified energy sources, large strategic reserves and policy support are expected to cushion the impact, although growth is projected to moderate from 5.0 per cent to 4.6 per cent.
India’s economy is still forecast to expand by 6.4 per cent, compared with 7.5 per cent previously.
In Africa, average economic growth is expected to ease slightly from 4.2 per cent to 3.9 per cent.
