La Jornada: Global growth will fall to its lowest level since the pandemic: WB

The World Bank (WB) estimates that the effects of the attacks by the United States and Israel on Iran will slow global growth to its lowest level since the coronavirus pandemic, in a context of higher energy prices and higher borrowing costs.

“The closure of the Strait of Hormuz has severely disrupted energy markets, with the price of Brent crude oil projected to average $94 per barrel in 2026, 36 percent above 2025 levels, assuming the worst disruptions subside in July. Fertilizer prices are expected to rise significantly this year, with repercussions on food prices,” the agency warned.

By reducing growth prospects for two out of three countries, the WB also highlighted that global growth will slow to 2.5 percent in 2026 and is estimated to rebound to 2.8 percent in 2027.

However, if the interruptions in energy supply turn out to be more acute than expected and are accompanied by significant financial stress, the WB considers, global growth could be only 1.3 percent in 2026 and inflation would rise to 4.4 percent.

Developing economies

This year, growth in developing economies is also expected to fall to the lowest since the pandemic, to 3.6 percent, and next year to be 4.2 percent.

Specifically, Persian economies directly affected by the conflict would be hardest hit, as their growth will plummet from 3.9 percent in 2025 to almost zero in 2026. As trade revives and investment in reconstruction begins, it could rise to around 5 percent in 2027-2028.

In this context, the organization also estimates that by 2028, developing economies, with the exception of China and India, will together have experienced almost a decade without progress in reducing their per capita income gap with advanced economies.

At the same time, since 2010, the aggregate public debt in these economies has gone from less than 40 percent of gross domestic product to more than 70 percent, and, according to the agency’s analysis, the more indebted a country is, the greater the increase in its borrowing costs with additional debt.

“In response to the current crisis, we are providing liquidity where it is needed now, and we are prepared with additional financing, guarantees and solutions from the private sector if pressures intensify. Our job is to help countries stabilize their situation, drive reforms and emerge stronger,” said Ajay Banga, president of the World Bank Group.