The global economy in five charts

Early in 2026, global activity seemed to be on a firm footing. Some major advanced economies were posting strong growth, with global trade lifted by surging AI-related exports. Since then, the conflict in the Middle East has notably worsened the outlook, according to the Global Economic Prospects report.

The conflict has caused huge disruptions to exports of energy and other commodities from the Gulf region, leading to sharp price increases. The baseline forecast assumes the most acute phase of disruptions ends in July, with shipping volumes through the Strait of Hormuz largely recovering by late 2026. On this basis, annual commodity prices are projected to rise by 22 percent this year, with the Brent oil price averaging $94 per barrel. 

Rising commodity prices have caused a global surge in inflationary pressures. Alongside, expected levels of policy interest rates in major advanced economies have increased, with bond yields also rising. In this context, global growth is forecast to weaken this year to 2.5 percent, the lowest rate since 2020. The expected deceleration is driven by slowing growth in advanced economies and EMDEs reliant on imported energy, as well as sharply weaker exports in economies in the Middle East affected by the conflict.

Geopolitical uncertainty remains elevated, with the outlook highly sensitive to the duration and intensity of conflict-related supply disruptions. In an energy stress scenario, the Strait of Hormuz does not meaningfully reopen to shipping until the fourth quarter of 2026 and medium-term oil supply capacity is also reduced. Oil prices surge anew, with the Brent oil price averaging $115 per barrel in 2026. Under these circumstances, a sharper increase in inflation would further weigh on global growth, with the impact potentially amplified by financial market stress.

Amid a turbulent decade beset by shocks, living standards in many emerging market and developing economies (EMDEs) are making scant progress. By 2028, EMDEs excluding China and India are expected to have collectively gained no ground in closing the income gap with advanced economies since the onset of COVID-19. Weaker growth prospects, constrained fiscal space, and declining official development assistance are stripping away buffers in the most vulnerable countries and widening already large development gaps.  

What could turn the tide and place the global economy on a healthier path? One candidate is AI. Based on the mid-point of early estimates across studies, AI could raise potential growth by 0.6 percentage point in the 2030s, via faster productivity improvements. However, achieving this outcome in EMDEs will require enhancing digital infrastructure, skills, and regulatory frameworks, while navigating challenging labor market transitions. Moreover, even if all countries attained this sizable boost, global potential growth would fall far short of its average in the 2000s, underscoring the need for wider reforms to support job creation, business dynamism, and private investment in EMDEs.