Source: United Nations (video statements)
A new report said that the crisis in the Middle East has delivered another major shock to the world economy, heightening uncertainty, stoking inflationary pressures and testing the resilience of global growth.
Countries face varying degrees of exposure to the shock and also differ in their capacities to cope, leading to uneven impacts.
For many developing economies, intensifying cost-of-living pressures, limited policy space, and slowing growth prospects risk further setbacks in advancing the Sustainable Development Goals, while entrenching inequalities across and within countries.
Published by the UN Department of Economic and Social Affairs (UN DESA), the World Economic Situation and Prospects as of mid-2026 updates the global and regional economic outlook for the year ahead.
Launching the report today (19 May) Shantanu Mukherjee, Economic Analysis and Policy Division’s Director of UN DESA, said that global growth is projected to slow to 2.5 percent in 2026 before edging up to 2.8 percent in 2027—a downgrade from January forecasts and well below pre-pandemic norms.
The Middle East conflict weighs heavily on the outlook, and with its duration and the pace of any recovery in energy flows highly uncertain, risks are tilted to the downside. Solid labour markets, resilient consumer demand, and AI-driven trade and investment in select economies provide only partial countervailing support.
Shantanu said, “Global inflation is projected to rise to 3.9 percent this year, which is 0.8 percentage points higher than we had anticipated in January. Increased energy prices are a potent factor, as are the prices of refinery products that are crucial to industrial production and commercial transport.”
He also said, “Though prospects are somber, there are concrete areas where international cooperation makes a difference: countries face a renewed impetus for establishing resilience, whether these be through investing in renewable energy and energy efficiency, diversifying their economies, making targeted sectoral interventions are improving mobilization and use of resources. All of these are shared priorities that the international system and the UN can help support.”
The energy shock has halted the global disinflation trend, with higher energy prices feeding through to broader costs across the economy. In developing economies, inflation is projected to rise from 4.2 percent in 2025 to 5.2 percent in 2026.
In developed economies, inflation is forecast to increase from 2.6 per cent in 2025 to 2.9 per cent in 2026, edging further above central bank targets in most countries.
Ingo Pitterle, Officer-in-charge at the Global Economic Monitoring Branch, Economic Analysis and Policy Division at UN DESA, said, “If the growth picture is concerning, the inflation picture is in some ways even more immediately pressing. We have to understand that the price shock is landing much faster than the output shock and for many households is already being felt. As the figure shows, we have revised our 2026 inflation forecast up moderately for developed economies but more significantly for economies in transition and developing economies.”
He continued, “Worldwide, we have lifted our inflation projections for 2026 in nine out of ten countries. The global disinflation trend we had welcomed at the start of the year has not just stalled; it has gone into reverse.”
He stated, “The broader lesson is clear: reducing reliance on volatile fossil fuel markets through investment in renewables and diversification is now more urgent than ever.”