UN Cuts Growth Forecast to 2.5% Amid Middle East War

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\r\n[The Financial News] The United Nations has again lowered its forecast for global economic growth this year, citing the prolonged shock from the Middle East war. It warned that surging energy prices, supply chain disruptions and rising food costs are all unfolding at once, reversing the recent slowdown in global inflation.
In its first-half 2026 report, "World Economic Situation and Prospects," released on the 19th local time, the UN projected global growth at 2.5% this year. That is 0.2 percentage points lower than its January forecast.
The UN said the global recovery is likely to remain limited and forecast growth of just 2.8% in 2027.
The report said the shock from the Middle East war surrounding Iran is having a broad impact on the global economy, especially through energy markets.
It said reduced supply, soaring crude prices, higher transport and insurance costs, supply chain disruption and fragmentation, and rising production costs are all occurring at the same time.
“Energy companies are making huge profits, but households and businesses around the world are bearing the burden of sharply higher prices,” the report said.
It identified rising food prices as the most serious risk. The report said damage to fertilizer supply chains is driving prices sharply higher, which is in turn reducing agricultural output and pushing up food prices.
The UN said the Middle East war has effectively halted the global disinflation trend that had continued since 2023.
As a result, the forecast for global inflation was raised from 2.6% to 2.9%. For developing countries, the inflation outlook was sharply lifted from 4.2% to 5.2%.
The UN said a solid labor market, consumer demand, and continued investment and trade growth centered on artificial intelligence are still supporting the economy, but they are not enough to offset the current geopolitical shock. It added that countries heavily dependent on fuel and food imports are expected to be hit the hardest.
Regionally, West Asia is facing the most severe impact. The UN forecast that growth in West Asia will plunge from 3.6% last year to 1.4% this year.
The report also said that beyond the energy crisis, damage to key infrastructure, losses at oil production facilities, and disruptions to trade and tourism are piling up.
Li Junhua, United Nations Under-Secretary-General for Economic and Social Affairs, said, "The Middle East crisis is deepening damage across developing economies." He added, "High borrowing costs and the depletion of financing for sustainable development have left developing countries in the greatest crisis."
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km@fnnews.com Kim Kyung-min Reporter