World Bank cuts 2026 global GDP growth forecast to 2.5%
Quick Look
- The World Bank lowered its 2026 global GDP growth forecast to 2.5% from 2.6%, citing high oil prices due to the Iran-Israel conflict.
- Growth could slow to 2.1% if energy prices remain high, or plummet to 1.3% if financial markets are strained.
- The bank plans to provide $50-60 billion in aid to developing countries.
AI-generated summary
Why It Matters
The World Bank has revised its global economic outlook downwards for 2026, primarily due to the impact of rising oil prices resulting from the conflict between Iran and Israel. This marks the lowest growth rate since the COVID-19 pandemic. The bank is also preparing financial aid for developing nations.
WASHINGTON (Jiji Press) -- The World Bank on Friday released its latest economic outlook, revising down its forecast for global real GDP growth in 2026 to 2.5%, a 0.1-percentage-point decrease from its January forecast. The revision was attributed to the direct impact of soaring crude oil prices stemming from the conflict between the United States, Israel, and Iran. The bank projected that the growth rate would be the lowest since the global spread of the novel coronavirus pandemic.
"The slowdown in the global economy is widespread," warned Ayhan Kose, deputy chief economist at the World Bank, expressing his concern.
The World Bank estimated that if high energy prices persist, global growth could slow to 2.1%. It also projected a sharp decline to 1.3% if financial markets come under pressure.
The World Bank plans to provide 50 billion to 60 billion dollars (approximately 8 trillion to 9.6 trillion yen) in funding to support citizens and farmers in developing countries severely affected by the economic downturn. If the economic slowdown becomes even more severe, the bank intends to increase its support framework to 80 billion to 100 billion dollars.
Meanwhile, the bank revised up its growth forecast for 2027 by 0.1 percentage point to 2.8%, anticipating that high energy prices will be brought under control.
Japan's growth forecast for 2026 was lowered to 0.7%, reflecting a slowdown in consumption due to high energy prices. For 2027, it was raised to 0.9%, anticipating a recovery in demand driven by wage increases.
The U.S. growth forecast for 2026 was kept unchanged at 2.2%. The negative impact of the conflict is expected to offset the boost from artificial intelligence (AI)-related investments. The forecast for 2027 was revised up to 2.1%.
The Eurozone's growth forecast for 2026 was lowered to 0.8% due to high energy prices. However, for 2027, it is expected to recover to 1.3% due to measures such as fiscal expansion.
China's growth forecast for 2026 was lowered to 4.2% amid a softening labor market. The forecast for 2027 was raised to 4.3%. While the easing of high energy prices is seen as a positive factor, the bank pointed out that high levels of debt remain a burden.
What to Watch
AI outlook — possibilities, not facts
Global GDP growth could slow to 2.1% if energy prices remain high.
Likely · Medium term
Global GDP growth could fall to 1.3% if financial markets are strained.
Possible · Medium term
World Bank may increase aid to developing countries to $80-100 billion if economic slowdown deepens.
Likely · Medium term
Open Questions
- How long will the Iran-Israel conflict and its impact on oil prices persist?
- What specific measures will the World Bank implement to support developing countries?
- To what extent will AI-related investments offset negative economic impacts in the US?
- What fiscal expansion measures will the Eurozone undertake?
