Amid escalating crises in the Middle East and surging oil prices, the United Nations has downgraded its global economic growth forecast for 2026 while upwardly revising its annual inflation estimates.
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UN economists project global Gross Domestic Product (GDP) growth to reach 2.5% in 2026, down from the 2.7% anticipated in January. Growth could potentially plunge to just 2.1% under a "worse-case scenario."
During a press conference, Shantanu Mukherjee, Director of the Economic Analysis Policy Division at the UN Department of Economic and Social Affairs (DESA), noted that this would rank among the weakest growth rates recorded this century, excluding the COVID-19 pandemic and the 2008 financial crisis. However, adopting a more optimistic tone, he added, "We are not close" to a full-blown global recession, though life could become harder for billions of people, and some nations may experience economic contractions.
Global inflation is expected to rise to 3.9% this year—a 0.8 percentage point increase from January forecasts, which were made prior to the US-Israeli airstrikes on Iran and Tehran's subsequent retaliatory closure of the Strait of Hormuz, a vital artery for shipments of oil, natural gas, fertilizers, and other petroleum products.
Mukherjee emphasized that "rising energy prices are a powerful driver, as are the prices of refined products essential for industrial production and commercial transport." However, he clarified that not all countries will experience identical inflation rates.
In rich, developed nations, inflation is projected to rise from 2.6% in 2025 to 2.9% in 2026. Meanwhile, in developing countries, inflation is set to accelerate from 4.2% to 5.2% as real incomes erode due to skyrocketing energy, transport, and import costs.
According to the mid-2026 "World Economic Situation and Prospects" report, the impact of the war on Iran is highly uneven, with the most severe economic fallout concentrated in Western Asia (which encompasses 21 Arab countries, including the Gulf states). Growth in the region is projected to plummet from 3.6% in 2025 to 1.4% in 2026, "driven not only by the energy shock but also by direct infrastructure damage and severe disruptions to oil production, trade, and tourism."
In Africa, average growth is expected to dip slightly from 4.2% last year to 3.9% this year. In Latin America and the Caribbean, growth will slow from 2.5% to 2.3% in 2026.
In the United States, the economy is expected to remain "relatively resilient," expanding by 2% this year—a level comparable to 2025. Conversely, Europe is "far more exposed, with a heavy reliance on imported energy squeezing households and businesses." Consequently, Eurozone growth will slow from 1.5% in 2025 to 1.1% in 2026, while the United Kingdom's growth will drop from 1.4% to 0.7%.
In Asia, China's diversified energy mix, vast strategic reserves, and government interventions act as a "buffer." Thus, its growth is expected to slow from 5% in 2025 to 4.6% this year. India remains one of the fastest-growing major economies with an economic expansion of 6.4%, down from its 7.5% growth in 2025.
UN Senior Economist Ingo Pitterle concluded by saying, "The question for China, as it is for India and others, is how long this conflict and its impacts persist, because all these buffers are clearly finite."
AP
