According to World Bank chief Ajay Banga, even if a peaceful conclusion of the Middle East conflict arrives today, global growth will still take a massive hit.
Ajay Banga said that the economic fallout from the conflict is already feeding into weaker global expansion, with both developed and emerging economies expected to feel the ripple effects in the coming days. It is worth mentioning that the ceasefire, announced by United States President Donald Trump last week, fell through as Tehran and Washington failed to reach a consensus in Islamabad.
“The risks deepen significantly if the conflict drags on. In a prolonged-war scenario, global growth could decline by as much as 1 percentage point, underscoring the fragility of the recovery and the sensitivity of markets to geopolitical shocks,” Ajay Banga said.
In fact, the World Bank sees emerging markets and developing economies bearing a disproportionate share of the global slowdown, with the projected growth rate now estimated at 3.65%, down from an earlier estimate of 4% made in October 2025. If the conflict continues, growth could fall sharply to 2.6%.
On the other hand, the emerging economies also need to deal with growing inflationary pressures, with the World Bank now forecasting the ratio at 4.9%, up from a previous estimate of 3%. In a worst-case scenario, inflation could surge as high as 6.7%, reflecting supply disruptions and higher energy costs linked to the Middle East conflict.
Ajay Banga’s comments come ahead of the crucial meeting in Washington, where top global finance professionals will meet to discuss the Iran war’s cascading effects, with a section of the analysts even calling the crisis the “third major shock,” after the COVID pandemic and the Russia-Ukraine war.
Top International Monetary Fund (IMF) and World Bank officials will be downgrading their forecasts for global growth and raising inflation predictions due to the war, keeping in mind factors like higher energy prices and supply disruptions.
Before the beginning of the Iran war on February 28, both global institutions were expected to lift their growth forecasts given the resilience of the global economy. However, the regional conflict, which is now steadily leaving its global imprints, has changed the equations.