UN cuts global growth forecast, blaming Middle East crisis

The United Nations has cut its growth forecast for the global economy, citing the fallout of the war on Iran.

Global gross domestic product (GDP) is expected to grow 2.5 percent this year and 2.8 percent in 2027, the UN’s Department of Economic and Social Affairs said in its latest forecast on Tuesday.

list of 4 items

list 1 of 4Vance: US ‘locked and loaded’ for military action if Iran talks fail
list 2 of 4US President Trump, family granted immunity from pending tax audits
list 3 of 4Nigeria says joint US strikes kill 175 ISIL fighters in country’s northeast
list 4 of 4Bodies of Italian divers recovered from cave in Maldives

end of list

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

The UN’s economic division cited rising energy prices due to the closure of the Strait of Hormuz and volatility in financial markets as reasons for the downgrade.

Shantanu Mukherjee, director of economic analysis at the department, said what began as a “blow to energy markets” when the United States and Israel started the war on February 28 had turned into a “broader supply shock of uncertain scope, magnitude and duration that is rippling across the world”.

Mukherjee said the forecasts assumed oil prices would begin easing in the second half of the year, and that governments would be able to mitigate some of the shock by tapping fuel reserves.

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

“Our numbers right now are coming with a significant amount of uncertainty,” Mukherjee told a news conference.

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

Mukherjee said developing countries have been hit hardest, with their growth this year expected to be 1.3 percentage points below the pre-pandemic average, compared with a 0.7 percentage-point decline for the global economy as a whole.

Western Asia is projected to see the sharpest slowdown of any region in 2026, with the UN slashing its growth forecast from 4.1 percent to 1.4 percent.

The Caribbean, West Africa, Central Africa, South-Eastern Europe and the United Kingdom had their forecasts for this year cut by 0.4-0.5 percentage points.

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

While the war has been paused since the US and Iran agreed to a truce on April 8, shipping remains at a practical standstill in the Strait of Hormuz amid the threat of Iranian attacks, crippling much of the global supply of oil and natural gas.

On Monday, 10 commercial ships transited the waterway, according to the maritime intelligence firm Windward, a fraction of the roughly 130 vessels that crossed daily before the start of the war.

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

Al Jazeera – Breaking News, World News and Video from Al Jazeera wp:paragraph