UN lowers global growth forecasts, criticizes Middle East crisis | Business and Financial Issues

Economists at the UN have predicted that global GDP will grow by 2.5 percent in 2026 and 2.8 percent in 2027.

The United Nations has lowered its forecasts for the global economy, citing the collapse of the war in Iran.

The World Gross Domestic Product (GDP) is expected to grow by 2.5 percent this year and 2.8 percent in 2027, the UN Department of Economic and Social Affairs said on Tuesday.

UN economists in January forecast growth of 2.7 percent in 2026 and 2.9 percent the following year.

The UN’s financial sector cited rising energy prices due to the closure of the Strait of Hormuz and instability in financial markets as reasons for the slowdown.

Shantanu Mukherjee, the department’s economic director, said that what started as a “shock in the energy markets” when the United States and Israel launched a war on February 28 turned into “a huge shock of unknown magnitude and duration that is spreading around the world”.

Mukherjee said the forecasts assume that oil prices will begin to fall in the second half of the year, and that governments will be able to reduce their shocks by drawing on oil reserves.

In “difficulties”, Mukherjee said, global growth could slow to 2.1 percent, one of the worst in this century outside of the COVID-19 pandemic and the global financial crisis of 2007-2009.

“Our figures right now come with a lot of uncertainty,” Mukherjee told a press conference.

“And the uncertainty … in and of itself is a huge drag on the economy.”

Mukherjee said that developing countries have been affected the most, their growth this year should be 1.3 percent under the global pandemic, compared to a 0.7 percent decline in the global economy.

West Asia is expected to see the largest decline of any region in 2026, with the UN reducing its forecast from 4.1 percent to 1.4 percent.

In the Caribbean, West Africa, Central Africa, South-Eastern Europe and the United Kingdom forecasts for this year were cut by 0.4-0.5 percent.

This year’s outlook for the US and China, the world’s two largest economies, remained unchanged, with growth of 2 percent and 4.6 percent, respectively.

Although the conflict has been halted since the US and Iran agreed to a deal on April 8, shipments have remained halted in the Strait of Hormuz amid the threat of an Iranian attack, hampering the flow of oil and natural gas around the world.

On Monday, 10 commercial ships passed through the waterway, according to maritime intelligence firm Windward, a fraction of the 130 ships that passed through each day before the war.

The UN is the latest international body to cut its global economic outlook, after the International Monetary Fund in April cut its forecast from 3.3 to 3.1 percent.