UN cuts 2026 global growth

The United Nations said on May 19 that it had cut its 2026 global growth forecast to 2.5% from the 2.7% it projected in January, blaming the Middle East conflict for a fresh energy shock that is lifting prices and clouding investment. In its mid-year update to the World Economic Situation and Prospects report, the UN said 2027 growth is now seen at 2.8%, pointing to only a modest recovery after a weaker 2026. The report said higher oil prices, rising freight and insurance costs, and tighter financial conditions were feeding through the global economy. Li Junhua, the UN’s under-secretary-general for economic and social affairs, said the crisis had intensified strains across developing economies. ### Why did the UN change its forecast? The UN’s May 2026 update said the Middle East crisis had delivered “yet another shock” to the global economy, slowing growth, reigniting inflationary pressures and heightening uncertainty. The downgrade was 0.2 percentage points from the January forecast, when the same report series had projected 2.7% global growth for 2026. (desapublications.un.org) The report said the main transmission channel was energy. Higher fuel costs were compounded by rising transport, shipping insurance and import costs, with effects cascading through supply chains and raising production costs more broadly. ### Where is the pressure showing up first? (desapublications.un.org) In developed economies, the UN said inflation is forecast to rise to 2.9% in 2026 from 2.6% in 2025. In developing economies, it projected inflation at 5.2% in 2026, up from 4.2% in 2025. The report said higher energy, transport and import costs were eroding real incomes and broadening price pressures across a wide range of goods. (desapublications.un.org) Food is one area the UN singled out. The report said fertilizer supplies had been disrupted, pushing up costs and potentially reducing crop yields, which in turn could add upward pressure to food prices. ### Why does Europe feature in this downgrade? The UN’s January report had already projected European Union growth at 1.3% in 2026, down from 1.5% in 2025, citing higher U.S. tariffs and geopolitical uncertainty. (desapublications.un.org) The mid-year update did not reverse that broader picture and said energy-importing economies were bearing the brunt of the latest shock. Europe is exposed because the UN said the shock is centered in energy markets and is being transmitted through prices, trade and financing conditions. The report described the regional effects as uneven, with energy-importing developing economies facing particular pressure because of high debt and limited fiscal space. (un.org) ### What did the UN say about markets and central banks? Global financial markets have so far remained resilient, the UN said, but higher energy prices have lifted inflation expectations and pushed short-term bond yields higher. For developing countries, the report said that has tightened external financing conditions and weakened fiscal positions, especially where policy space is already limited. (desapublications.un.org) Central banks face a harder choice, according to the report. The UN said raising interest rates to contain inflation could weaken growth further, while leaving policy unchanged could allow price pressures to become entrenched. ### How weak does the UN think 2026 could be? (desapublications.un.org) The UN said 2.5% growth would leave global output well below the pre-pandemic average of 3.2%. Its policy page for the mid-year update described the new forecast as a downgrade from January and said risks remain tilted to the downside because the duration of the Middle East conflict and the pace of any recovery in energy flows are highly uncertain. (desapublications.un.org) The next reference point in the UN outlook is 2027. The organization’s mid-2026 World Economic Situation and Prospects update puts global growth at 2.8% next year, and it published the accompanying data tables and regional breakdowns alongside the report in May. (policy.desa.un.org) (desapublications.un.org)