World Bank Warns Global Growth at Weakest Since COVID-19 as Gulf Economies Near Zero
World Bank Slashes Global Growth Outlook to Lowest Since COVID-19
The World Bank delivered a stark assessment of the global economy on June 11, 2026, cutting its growth forecast to 2.5% for this year — the weakest expansion since the COVID-19 pandemic slammed the world in 2020. The projection, down from 2.9% growth recorded in 2025, reflects a sweeping downgrade affecting nearly two-thirds of all economies tracked by the institution. In its Global Economic Prospects report, the bank warned that the combined pressures of conflict in the Middle East, surging energy prices, and rising borrowing costs are combining to create the most challenging macroeconomic environment since the post-pandemic recovery began.
“Developing countries have faced a series of challenges over the last decade,” said Ajay Banga, President of the World Bank Group. “The impact differs by country, but the basic test is the same: protect people and preserve stability today, without giving up on growth and jobs tomorrow.” Banga emphasized that the World Bank’s primary role in the current moment is to help countries “steady the ship” — providing liquidity where it is needed most while maintaining the structural reforms that enable stronger growth on the other side of any crisis.
The downgrade is not minor tweaking. The World Bank now estimates that if energy supply disruptions prove more severe than currently assumed and are accompanied by substantial financial stress, global growth could plummet to just 1.3% in 2026 — a contraction that would be functionally indistinguishable from a global recession. Even in the bank’s base case, the outlook represents a significant deterioration from the relatively stable growth trajectory that analysts had projected at the start of the year.
Strait of Hormuz Disruption Sends Oil Prices Soaring
At the center of the downward revision is the partial closure of the Strait of Hormuz, the world’s most critical oil chokepoint, which has sent energy markets into disarray. The World Bank projects Brent crude oil to average $94 per barrel in 2026 — a staggering 36% above 2025 levels — assuming the most severe disruptions begin to ease by July. If they do not, the bank acknowledges the figure could move even higher, with knock-on effects across manufacturing, transportation, and consumer purchasing power worldwide.
The energy price shock is already rippling through global supply chains. Fertilizer prices are forecast to increase significantly in 2026, with direct consequences for food production costs in import-dependent nations. Together, these pressures are pushing the global inflation rate to an estimated 4.0% this year, up substantially from 3.3% in 2025 — reversing much of the disinflation progress that central banks had worked painstakingly to achieve over the previous two years.
“The conflict has taken a toll on global activity, but every crisis also brings an opportunity,” said Ayhan Kose, the World Bank Group’s Deputy Chief Economist and Director of the Prospects Group. “This moment should be used to strengthen policy frameworks, invest in infrastructure, accelerate business-enabling reforms, and mobilize private capital to support job creation at scale.” Kose’s framing — crisis as opportunity — underscores the World Bank’s institutional push for governments not to merely survive the current shock but to use it as a catalyst for structural reform.
Regional Blowback: Gulf Economies Near Zero Growth
The geographic concentration of the damage is striking. Economies in the Gulf region that are directly affected by the conflict are expected to take the hardest hit, with growth projected to tumble from 3.9% in 2025 to effectively zero in 2026 — a near-complete economic standstill for nations whose budgets depend heavily on hydrocarbon revenues and whose populations expect continued public investment. The bank projects these economies will rebound to approximately 5% growth in 2027–28 as trade routes normalize and reconstruction spending begins, but the interim period represents a severe human and economic cost for millions of workers and families.
South Asia, meanwhile, continues to register the strongest growth of any region, but even that story is one of meaningful deceleration: from 7% growth in 2025 to 6.3% in 2026. Sub-Saharan Africa’s growth is also slowing, with the biggest pressures coming through inflation, including high food prices driven by fertilizer supply shortages. For developing economies outside China and India, the bank warns that by 2028 they will have collectively experienced nearly a decade with virtually no progress in closing their per-capita income gap with advanced economies — a stagnation with profound implications for global poverty and geopolitical stability.
Responding to the crisis, the World Bank Group announced it is immediately making $50–60 billion available through existing instruments, including $25 billion of pre-arranged financing, to support social safety nets, boost fiscal capacity, and provide working capital for firms and farms across more than 30 countries actively working with the institution. If the conflict and its economic fallout persist, the bank says it can scale up support to $80–100 billion over 15 months. The question analysts are now asking is whether that financial firepower will be enough to prevent the current slowdown from becoming a more prolonged period of stagnation for the world’s most vulnerable economies.
