Global Growth Cut to 2.5%, Could Drop to 2.1%
Inflation Forecast Raised to 3.9%
West Asia Growth to Plunge From 3.6% to 1.4%
The United Nations has issued a severe warning that the global economy is losing momentum amid the Middle East conflict, which is driving up energy prices and disrupting trade.
In its latest World Economic Situation and Prospects update, UN economists cut their forecast for global GDP growth to 2.5% in 2026, down from 2.7% projected in January.
In a more adverse scenario, growth could fall to just 2.1%, one of the weakest rates this century outside of the COVID-19 pandemic and the 2008 financial crisis.
Global inflation is also expected to rise to 3.9% this year, nearly a full percentage point higher than earlier estimates. The surge follows U.S. and Israeli air strikes on Iran and Tehran’s retaliatory move to block the Strait of Hormuz, an essential waterway for oil and gas shipments.
“Increased energy prices are a potent factor, as are refinery product costs vital to industrial production and transport,” said Shantanu Mukherjee, director of economic analysis at the UN Department of Economic and Social.
The influence varies widely between regions. While growth in West Asia is projected to plunge from 3.6% in 2025 to 1.4% in 2026 due to energy shocks, infrastructure damage, and severe disruptions to oil production, trade, and tourism, Africa’s growth will ease slightly, from 4.2% last year to 3.9% this year.
Meanwhile, Latin America and the Caribbean face only a modest slowdown, from 2.5% to 2.3%.m 2.5% to 2.3%.
The U.S. economy is forecast to remain “comparatively resilient” with growth holding at 2%, but Europe faces a heavier strain, with EU growth expected to drop from 1.5% in 2025 to 1.1% in 2026.
The UK outlook is even weaker, with growth falling from 1.4% last year to 0.7% this year. In Asia, China’s diversified energy mix and government support are cushioning the blow, with growth slowing from 5% in 2025 to 4.6% this year.
India remains one of the fastest-growing major economies, though its expansion is forecast to ease from 7.5% to 6.4%.
“We are not close to a recession,” Mukherjee said. “But life could get harder, and some economies may contract.” Senior UN economist Ingo Pitterle noted that China’s and India’s buffers depend on the conflict’s duration: “All these buffers are clearly limited.”
