Global growth now projected at 2.5% in 2026, 2.8% in 2027: UN

Global growth is now projected at 2.5 per cent in 2026 and 2.8 per cent in 2027—downward revisions to an already subdued outlook.

The global economy is under stress as the Middle East crisis clouds the growth outlook, stokes inflation and adds to uncertainty across financial markets, the UN ‘World Economic Situation and Prospects 2026: Mid-Year Update’ said.
Global growth is projected at 2.5 per cent in 2026 and 2.8 per cent in 2027—downward revisions to a subdued outlook.
Millions are at risk of being pushed into poverty.

Although these revisions are modest, forecast uncertainty has risen considerably, as outcomes hinge on the conflict’s duration and scale; a faster-than-expected resolution could restore confidence, while a prolonged disruption would deepen the downgrade, says the report.

The closure of the Strait of Hormuz is driving fuel, fertiliser and food prices higher and straining global supply chains. Global inflation is now expected to reach 3.9 per cent in 2026—0.8 percentage points above the January forecast—reversing a disinflationary trend and eroding household purchasing power.

Financial market volatility has increased, with risks of renewed portfolio outflows and tighter external financing conditions if the conflict persists. Central banks are expected to hold rates higher for longer to curb inflation, while governments face rising fiscal pressures from weaker growth alongside necessary expenditures to cushion crisis impacts, the report notes.

Resilient labour markets and artificial intelligence (AI)-driven trade and investment support global activity, but are unlikely to fully offset widespread headwinds.

The outlook is most challenging for fuel- and food-importing developing economies, where surging import costs risk widening fiscal deficits, straining external balances and deepening food insecurity.

Low-income households—which spend the largest share of their budgets on food and energy—bear the heaviest burden, with millions at risk of being pushed into poverty.

Combined with declining aid flows and mounting debt-service costs, these pressures threaten to reverse hard-won development gains and further slow progress toward the UN Sustainable Development Goals, the report adds.

Fibre2Fashion News Desk (DS)