World Bank Warns Global Growth to Slow Sharply

COLOMBO (News 1st); Global economic growth is expected to slow to its weakest pace since the COVID-19 pandemic due to ongoing tensions in the Middle East, the World Bank has warned.

The warning comes through the World Bank’s Global Economic Prospects report for 2026.

Global growth is projected to fall to 2.5% in 2026.

The World Bank points out that rapidly rising energy prices, higher inflation, and increased borrowing costs will contribute to this slowdown.

The World Bank’s Global Economic Prospects 2026 report warns that the outlook could deteriorate further if supply disruptions worsen.

According to the report, Iran’s closure of the Strait of Hormuz—a key transit route for oil and gas shipments—in response to hostile actions by the United States and Israel has placed significant pressure on global energy and supply chains.

The World Bank estimates that Brent crude oil, the international benchmark, will average $94 per barrel this year.

This represents a 36% increase compared to the average price recorded last year.

The report further projects a significant rise in fertilizer prices this year, noting that it will also impact global food prices.

The World Bank reveals that disruption to the Strait of Hormuz could push global inflation to 4% this year, up from 3.3% last year, marking a notable increase.

If energy supply disruptions worsen further, inflation could rise to 4.4%, while global economic growth could drop sharply to as low as 1.3%, the World Bank warns.

Meanwhile, the report highlights that the Middle East conflict has led to shortages of energy and agricultural products in the South Asian region.

It notes that inflation in countries across the region generally remains within or below central bank target ranges.

According to the World Bank’s Global Economic Prospects 2026 report, Sri Lanka’s economic growth is forecast at 3.6% this year.

Quote from World Bank Report:

"Monetary policy in Sri Lanka was tightened at the end of May to tame inflationary pressures.
In the South Asian Region, excluding Bangladesh and India, the projected softening of growth in 2026 partly reflects heightened uncertainty and higher input costs, which will weigh on investment, including in Nepal and Sri Lanka. Revenue collection will likely remain strong in Sri Lanka, maintaining a primary surplus."