The United Nations on Tuesday lowered its 2026 global GDP growth forecast to 2.5%, down from 2.7% in January, and raised its inflation projection, citing Middle East crises and rising oil prices. In an adverse scenario, growth could fall to just 2.1% — one of the weakest rates this century outside the COVID-19 pandemic and the 2008 financial crisis, Newswire reported, citing AP.
Global inflation is projected to rise to 3.9% in 2026, 0.8 percentage points higher than forecast in January, before the US-Israel airstrikes on Iran and Iran’s subsequent closure of the Strait of Hormuz. “Increased energy prices are a potent factor, as are the prices of refinery products that are crucial to industrial production and commercial transport,” said Shantanu Mukherjee, Director of Economic Analysis at the UN Department of Economic and Social Affairs.
Developing countries face inflation accelerating from 4.2% to 5.2% as higher energy, transport and import costs erode real incomes. Richer countries face a smaller rise from 2.6% to 2.9%. “We are not close to a recession,” Mukherjee said, “but life can get harder for billions of people.”
West Asia takes the heaviest hit. Growth across the 21 Arab countries 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,” per the World Economic Situation and Prospects mid-2026 report.
The US economy is expected to remain “comparatively resilient” with 2% growth. Europe is more exposed: EU growth is seen slowing from 1.5% to 1.1% and the UK from 1.4% to 0.7%. China is forecast at 4.6%, India at 6.4%.
For Sri Lanka — an import-dependent developing economy — the 5.2% developing-country inflation projection echoes the IMF’s growth downgrade and the CSF think-tank’s structural reform warning.
