© IOM/V.-D. Rafil The crisis in the Middle East has exacerbated tensions in the economies of developing countries. UN predicts global economic growth to slow in 2026 Economic Development
The crisis in the Middle East has dealt a major blow to the global economy, causing slower growth, accelerating inflation and increasing levels of uncertainty. This is stated in a report released on Tuesday by the UN Department of Economic and Social Affairs.
Global GDP growth is forecast to be 2.5 percent in 2026, down 0.2 percent from January estimates and well below pre-pandemic levels. The downward revision to the forecast signals a further weakening of the already subdued outlook for the global economy.
The global downward trend in inflation observed since 2023 has stalled due to conflict in the Middle East. In advanced economies, inflation is projected to rise from 2.6 percent in 2025 to 2.9 in 2026.
In emerging economies, inflation is projected to accelerate from 4.2 to 5.2 percent as rising costs for energy, transportation and imported goods undermine real incomes and increase price pressure in a wide range of product categories.
Experts are particularly concerned about food prices. Disruption of fertilizer supplies has led to rising production costs, which may lead to lower yields and, as a result, put upward pressure on food prices.
Global financial markets have so far shown stability, having managed to absorb the initial shock. However, rising energy prices have led to higher inflation expectations, which in turn has pushed up short-term bond yields. For developing countries, this has translated into tightening external financing conditions and weakening fiscal positions.Large-scale slowdown with uneven regional impacts
The impact of the crisis on countries and regions is extremely uneven, with the most serious damage suffered in Western Asia. Growth in the region is projected to decline sharply, from 3.6 percent in 2025 to 1.4 percent in 2026. This is due not only to the energy shock, but also to disruptions in oil production, trade and tourism.
In other regions, the situation is very heterogeneous. The United States is expected to remain relatively resilient, with economic growth projected at 2.0 percent in 2026.
Europe, on the contrary, turned out to be more vulnerable: heavy dependence on imported energy creates a serious burden on both the population and business. Growth in the European Union is forecast to slow from 1.5 percent in 2025 to 1.1 percent in 2026, while the UK is expected to see a sharper decline, from 1.4 percent to 0.7 percent.
China’s GDP growth is expected to slow from 5.0 percent to 4.6 percent. India remains one of the world’s fastest-growing major economies, with output expected to increase by 6.4 percent. The decrease in this indicator compared to the 2025 level (7.5 percent) indicates the restraining influence of rising energy import costs and tightening financial conditions.
In Africa, average growth is projected to slow modestly in 2026, from 4.2 percent to 3.9 percent, but these figures mask a widening gap, with oil and gas exporters benefiting from high prices while energy importers face growing fiscal pressure from rising fuel and food costs.
In Latin America and While most countries in the Caribbean have been less affected than those in other regions, the region remains on a low growth trajectory, with growth projected to slow from 2.5 percent to 2.3 percent in 2026.
© ILO/Apex Image The global economy is forecast to grow 2.5 percent in 2026, down 0.2 percentage points from January estimates and well below pre-pandemic levels.
Threat to development gains
Conflict in the Middle East threatens to reverse development gains and further slow progress towards the Sustainable Development Goals. Price shocks undermine food security, real incomes, and productive sector investment, increasing the risk of long-term socioeconomic impacts.
Low-income households bear the heaviest burden as rising food and energy prices absorb a larger share of their budgets and rising costs outpace wage growth, leading to deepening poverty. However, in countries where vulnerable populations are most in need of protection, governments are least able to do so.
On the environmental front, continued high energy prices pose the risk of a short-term reversion to carbon-intensive fuels. To counter this trend, the report says, sustained multilateral action is needed, including trade openness, expansion of concessional financing, and support for structural change.
Other factors
In addition to the consequences of the conflict in the Middle East, the report’s authors highlight weakening catalysts for economic growth in the medium term. perspective. Global productivity growth has slowed since the global financial crisis, and current shocks risk exacerbating this trend by dampening investment and trade flows. Geopolitical fragmentation and limited fiscal space risk further undermining productivity growth. The development of artificial intelligence, experts note, contains significant potential, but it is also associated with serious risks, while the benefits are likely to accrue to a limited number of countries.
According to the forecasts of the report’s authors, a moderate economic recovery will begin in 2027 with a growth rate of 2.8 percent. Growth is expected to be supported by strong labor markets, stable consumer demand, and AI-fueled trade and investment activity.