UN lowers forecast for global economic growth in 2026 over Mideast energy crisis

UNITED NATIONS (AP) — Responding to Middle East crises and rising oil prices, the United Nations on Tuesday lowered its forecast for global economic growth and raised the prospects for inflation this year.

U.N. economists said global GDP growth is now forecast at 2.5% for 2026, down from 2.7% in January, and they said it could fall to only 2.1% “in a more adverse scenario.”

That would be one of the weakest growth rates this century, outside of the COVID-19 pandemic and the global financial crisis of 2008, Shantanu Mukherjee, director of economic analysis in the U.N. Department of Economic and Social Affairs, said at a news conference.

On a somewhat positive note, he said, “we are not close” to a recession, but life can get harder for billions of people, and some countries may see their economies contract.

Global inflation is projected to rise to 3.9% this year, 0.8% higher than forecast in January, before the U.S. and Israel launched airstrikes on Iran. Iran responded by blocking the Strait of Hormuz, a critical waterway for shipments of oil, natural gas, fertilizer and other petroleum products.

“ Increased energy prices are a potent factor, as are the prices of refinery products that are crucial to industrial production and commercial transport,” Mukherjee said.

But he stressed that not all countries will experience the same rate of inflation.

In richer developed countries, inflation is projected to rise from 2.6% in 2025 to 2.9% in 2026. In developing countries, inflation is forecast to accelerate from 4.2% to 5.2% as higher costs for energy, transportation and imported goods erode real incomes.

The impact of the Iran war has been highly uneven, with the most severe economic damage concentrated in West Asia, a region comprised of 21 Arab countries, including those in the Persian Gulf, according to the World Economic Situation and Prospects report for mid-2026.

Economic growth in the region is projected to plunge from 3.6% in 2025 to 1.4% in 2026, “driven not only by the energy shock but also by direct infrastructure damage and severe disruptions to oil production, trade and tourism.”

In Africa, average growth is projected to drop only slightly, from 4.2% last year to 3.9% this year, according to the report. And in Latin America and the Caribbean, it is forecast to slow from 2.5% to 2.3% in 2026.

In the United States, the economy is expected to remain “comparatively resilient” with 2% growth forecast this year, broadly similar to 2025, it said.

By contract, Europe “is more exposed, with heavy reliance on imported energy straining households and businesses,” the economists said. Economic growth in the European Union is expected to slow from 1.5% in 2025 to 1.1% in 2026, while growth in the United Kingdom is forecast to drop further, from 1.4% last year to 0.7% this year.

In Asia, the U.N. said China’s diversified energy mix, sizable strategic reserves and government actions are providing a buffer, so its economic growth is only expected to slow from 5% in 2025 to 4.6% this year.

India is forecast to remain one of the fastest growing major economics, with its economy expanding by 6.4% this year, although that is lower than its 7.5% growth in 2025.

“The question for China, similar to the case of India and other countries, is just how long with this conflict and the impact of the conflict last, because all these different buffers are clearly limited,” senior U.N. economist Ingo Pitterle told reporters.