World Bank Cuts Global Growth Forecast to 2.5% on Middle East War

The World Bank has downgraded its global growth forecast for 2025 to 2.5%, the weakest since the COVID-19 pandemic, citing the war in the Middle East as a key driver of higher inflation and borrowing costs. The Washington-based development bank's half-yearly Global Economic Prospects report lowered growth projections for two-thirds of countries worldwide. Global growth was estimated at 2.7% in 2025, but the new forecast reflects worsening conditions. The report warns that the conflict is exacerbating supply chain disruptions and energy price volatility, which are feeding into broader inflationary pressures. The World Bank also noted that elevated interest rates in major economies are constraining fiscal space for developing nations. The downgrade underscores a synchronized slowdown across advanced and emerging economies, with risks tilted to the downside.

Global Impact

Economically, the slowdown is broad-based, with the World Bank cutting forecasts for two-thirds of countries, signaling synchronized weakness. The Middle East conflict is the primary catalyst, disrupting trade routes and energy markets, which raises input costs globally.