Economy

    Global Growth To Slow To 2.5 Percent By 2026

    World Bank warns Middle East conflict will disrupt energy markets, driving up inflation and borrowing costs worldwide.

    2 min read3 min listen
    The World Bank Group projects global economic growth will slow to 2.5% by 2026. This marks the weakest pace since the start of the COVID-19 pandemic, according to their latest Global Economic Prospects report. The Middle East conflict is the primary driver of this slowdown. Higher energy prices, rising inflation, and increased borrowing costs are weighing on economic activity worldwide. The Bank has downgraded growth forecasts for two-thirds of economies compared with January projections. This trend fits a broader narrative of economic vulnerability in Ghana and other developing nations. Ghana's own growth is expected to slow to 4.8% by 2026, affected by regional headwinds. This global deceleration can impede efforts to narrow income gaps between developing and advanced economies, a long-standing challenge. Ajay Banga, President of the World Bank Group, noted that developing countries face another major shock after years of overlapping crises. He emphasized the need to protect people and preserve stability today, while still aiming for future growth and jobs. The World Bank is providing immediate liquidity and preparing additional financing. Decision-makers and markets will closely watch energy prices and inflation figures in the coming months. Sustained disruptions could trigger more aggressive responses from central banks, further increasing borrowing costs. Global financial institutions must prepare for potential deeper economic strain. Brent crude oil prices are forecast to average US$94 per barrel in 2026, a 36.0% increase over 2025 levels. This projection assumes the worst disruptions ease by July. Fertiliser prices are also expected to rise significantly this year, impacting food costs and contributing to global inflation. Overall global inflation is projected to reach 4.0% in 2026, up from 3.3% in 2025. These inflationary pressures will disproportionately affect developing economies. If energy supply disruptions worsen alongside severe financial stress, global growth could fall to just 1.3% in 2026. Developing economies will experience particularly strong impacts. Their growth is forecast to drop to a post-pandemic low of 3.6% in 2026, down from 4.4% in 2025. This slow growth rate hampers their ability to improve living standards and reduce poverty. Sub-Saharan Africa's growth is also expected to decelerate significantly. The region faces pressure from inflation, high food prices, and shortages in fertiliser supply. These factors pose substantial risks to food security and economic stability in the region. The World Bank Group is making US$50 billion to US$60 billion available through existing instruments to support affected countries. This includes US$25 billion in pre-arranged financing. This support aims to bolster social safety nets, strengthen fiscal capacity, and provide working capital to businesses. More than 30 countries are already collaborating with the World Bank to enhance readiness and enable rapid response. If the conflict and its economic fallout persist, the Bank could scale up support to between US$80 billion and US$100 billion over 15 months. This highlights the severity of the expected economic fallout.

    Comments

    More from StatsGH