UN cuts global growth forecast to 2.5%, blames West Asia crisis

A modest rebound is projected in the global economy after the current slowdown phase

The United Nations on Tuesday cut its forecast for global economic growth, saying the West Asia crisis had reignited inflationary pressures and heightened uncertainty.

A UN press release summarising the mid-year update to the global body's World Economic Situation and Prospects said :

• Global GDP growth is forecast at 2.5 percent in 2026, compared with an estimated 3.0 percent 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 percent in 2027.

• Solid labor 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.

• 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  percent in  2025 to 2.9 percent in  2026 and in developing economies from 4.2 percent to 5.2 percent.

• Fertilizer supplies have been disrupted, pushing up costs, which could reduce crop yields, putting upward pressure on food prices.

• Global financial markets have remained resilient, but inflation expectations have driven short-term bond yields higher.

• The most severe damage is in Western Asia, where growth is projected to plunge from 3.6 percent to 1.4 percent, exacerbated by damage to infrastructure, trade, and tourism.

• The United States is expected to remain comparatively resilient, with growth projected at 2.0  percent 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. EU growth is projected to slow from  1.5 percent to 1.1 percent and in Britain from  1.4 percent to  0.7 percent.

• China's diversified energy mix, sizable strategic reserves, and policy support are providing a buffer, with its growth projected to moderate from 5.0  percent to 4.6  percent.

• India's output is still expected to expand by 6.4  percent against 7.5 percent.

• In Africa, average growth is projected to ease slightly, from 4.2 percent to 3.9 percent.