The World Bank (WB) stated in its latest forecast report that the war between the United States, Israel, and Iran is significantly lowering the outlook for global economic growth. If the conflict drags on, dozens of developing countries may experience years of economic stagnation.
The Washington Post pointed out that some of the World Bank’s top economists estimate that global economic growth this year will be only 2.5%, down from 2.9% in each of the past two years, and the slowest pace since the outbreak of COVID-19 in 2020.
Since the Strait of Hormuz has remained nearly closed since early March, costs of oil, natural gas, fertilizers, and industrial chemicals have surged. The World Bank called this the “biggest supply shock in 50 years,” exerting pressure on both developing and developed economies.
Ayhan Kose, World Bank Deputy Chief Economist, said: “The global economy hasn’t fallen off a cliff, but the slowdown is obvious. Many developing countries have fewer resources at hand to cope with this shock and are less able to withstand it.”
More Pessimistic Than January Outlook
This latest forecast is more pessimistic than the World Bank’s outlook in January. Back then, the WB believed that the global economy should basically withstand the uncertainties in trade caused by President Trump’s tariff policies.
This time, World Bank experts have downgraded the economic growth forecast for about two-thirds of countries worldwide, with Turkey, Bangladesh, and South Africa seeing especially sharp downgrades.
Countries near the Persian Gulf war zone are expected to be hit the hardest. Kose said that Kuwait, Iraq, and Qatar could see close to zero economic growth by 2026. For the United Arab Emirates, expected economic growth for this year is only 2.4%, less than half of what the World Bank forecast before the war broke out.
The World Bank’s latest “Global Economic Prospects” (GEPs) report bluntly states that the 2020s will almost certainly become a “lost decade” for dozens of developing countries. These countries have made no progress narrowing the income gap with advanced economies, facing long-term development stagnation and still failing to catch up to the living standards of wealthy nations. (News source: CNA)