Taking note of the inflationary pressures and heightened uncertainty due to the Iran war and the Strait of Hormuz blockade, the United Nations has cut its forecast for global economic growth, saying that the global GDP growth will likely be at 2.5% in 2026, compared with an estimated 3.0% in 2025, 0.2 percentage points below the January projection and well below pre-pandemic growth rates.
“A modest recovery is projected at 2.8% in 2027. Solid labour markets, resilient consumer demand, and AI-driven trade and investment are expected to provide support, but the downgrade underscores a further weakening of a subdued global outlook,” said the UN press release while summarising the mid-year update to the global body’s World Economic Situation and Prospects.
A surge in energy prices has delivered windfall gains for energy companies but intensified cost pressures for households and businesses. In developed economies, inflation is forecast to rise from 2.6% in 2025 to 2.9% in 2026, and in developing economies, from 4.2% to 5.2%. Fertiliser supplies have been disrupted, pushing up costs, which could reduce crop yields, putting upward pressure on food prices,” it added further.
While noting that the global financial markets have remained resilient, the UN said that inflation expectations have driven short-term bond yields higher.
The most severe damage of the Iran war has been seen in Western Asia, with sectors like energy, infrastructure, trade and tourism getting affected at large scale. As per the global body, GDP growth is projected to plunge from 3.6% to 1.4%.
The United States, on the other hand, is expected to remain comparatively resilient, with growth projected at 2.0% in 2026, broadly steady from 2025 on strong household demand and tech investment.
“Europe is more exposed, with reliance on imported energy straining households and businesses. European Union growth is projected to slow from 1.5% to 1.1% and in Britain from 1.4% to 0.7%. China’s diversified energy mix, sizeable strategic reserves, and policy support are providing a buffer, with its growth projected to moderate from 5.0% to 4.6%,” the UN noted further.
“India’s output is still expected to expand by 6.4% against 7.5%. In Africa, average growth is projected to ease slightly, from 4.2% to 3.9%,” it concluded.