In its latest report on the global economic outlook, the World Bank warned of a new wave of slowdown hitting the backbone of the global economy as a result of the escalation of geopolitical tensions in the Middle East.
The official report released by the bank on Friday indicated that these turmoil have destabilized energy markets and fueled inflationary pressures globally, forcing a comprehensive reassessment of monetary policy.
Based on these data, the Bank lowered its forecast for global growth to 2.5% in 2026 compared to 2.9% in 2025, representing the sharpest and lowest decline in the international economy since the end of the COVID-19 pandemic.
Widening income gap in emerging markets
The international report attributed this sharp decline to the poor performance of economies that rely mainly on energy imports, in addition to the direct impact of a number of countries in conflict zones.
The World Bank predicted that emerging market and developing economies will register slower growth at 3.6 percent, accompanied by a sharp slowdown in per capita income growth.
The report drew attention to a worrying data that the income gap between developing countries and advanced economies will not return to pre-pandemic indicators until 2028, reflecting the extension of structural economic weakness for several years to come.
Any further escalation in conflicts could lead to a worse-case scenario that would see global growth fall to just 1.3 percent in 2026, should commodity and food supply shocks worsen and financial pressures intensify, the World Bank experts said.
Despite this gloomy nature, the report indicated that the rapid expansion of AI investments could provide some logistical support to improve productivity, stressing the need for urgent international action to strengthen energy security and strengthen the multilateral trading system.
Public debt challenges and commodity market volatility
In a separate and extensive analysis, the World Bank addressed the crisis of public debt accumulation in emerging markets that has been ongoing since 2010, emphasizing that there is a direct and direct relationship between high levels of excessive indebtedness and rising domestic interest rates and borrowing costs.
The report explained that volatility in commodity prices is putting constant pressure on the public budgets of exporting countries, as price spikes push governments to increase public spending at a pace that eats up revenues and prevents the building of solid cash reserves. The Bank concluded its report by calling on countries to adopt a comprehensive reform approach that combines strict fiscal rules, activating sovereign funds, and diversifying sources of national income to counter recurring shocks.
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