UN cuts global growth forecast

The United Nations said on May 20 that it had lowered its 2026 global growth forecast, warning that conflict in the Middle East was pushing up energy, transport and import costs and reviving inflation risks. The U.N. Department of Economic and Social Affairs said in its mid-2026 update that global growth is now expected at 2.5% in 2026, down from the 2.7% forecast in its January outlook. The report said the shock was hitting an already fragile economy through oil markets, shipping routes and tighter financial conditions. UN Trade and Development, or UNCTAD, has issued a parallel warning on trade, saying merchandise trade growth could slow sharply this year. ### Why did the U.N. change its forecast in May? The U.N. Department of Economic and Social Affairs said the trigger was the escalation of geopolitical tensions after late February 2026, which disrupted energy markets and major shipping routes. In its May 20 update, DESA said the Middle East crisis had “reignited inflationary pressures” and heightened uncertainty across financial markets. The report said developing economies were bearing the heaviest costs because they were more exposed to higher import prices, weaker currencies and tighter external financing. (un.org) The January 2026 World Economic Situation and Prospects had projected 2.7% global growth for 2026. The mid-year update cut that to 2.5%, according to the U.N. publication page and the May 20 DESA release. The U.N. also said inflation prospects had worsened as higher oil and transport costs filtered through to import bills and consumer prices. (un.org) ### Where is the trade slowdown showing up? UNCTAD said in its 2026 trade foresight update that world merchandise trade growth is projected to fall to between 1.5% and 2.5% in 2026 from 4.7% in 2025. The agency said the outlook changed after geopolitical tensions intensified in late February and conflict in the Middle East disrupted energy markets, financial conditions and shipping through the Strait of Hormuz. (desapublications.un.org) That route is a critical corridor for global oil and gas trade. UNCTAD’s April 2026 Global Trade Update said trade growth had remained firm into the first quarter, but it warned that the rest of the year would be weaker because of rising trade costs, persistent inflation and geopolitical uncertainty. The report also said trade-price inflation rebounded to nearly 1.5% quarter on quarter in the first quarter of 2026, suggesting part of the early-year increase in trade values reflected higher prices rather than stronger volumes. (unctad.org) ### How does this compare with other big forecasts? The International Monetary Fund said in its April 2026 World Economic Outlook that global growth would slow to 3.1% in 2026 under the assumption that the conflict remained limited in duration and scope. The IMF also said headline inflation would rise modestly in 2026 before resuming its decline in 2027. Its forecast was based on information available through April 1, before the U.N.’s May mid-year revision. (unctad.org) The difference in levels partly reflects different forecasting frameworks, but the direction is the same across institutions: slower growth, firmer inflation and higher downside risks tied to the Middle East shock. The U.N. and UNCTAD both said developing economies are especially vulnerable because they face higher import costs and more fragile external financing conditions. (imf.org) ### Which economies are most exposed? Developing economies are the clearest pressure point in the U.N. update. DESA said countries that import fuel and food face the biggest immediate hit from higher shipping and energy costs, while economies with weaker currencies face a second-round increase in local import prices. UNCTAD said slower trade, higher freight costs and financial volatility were likely to weigh on investment and supply chains across emerging markets. (un.org) The IMF said in April that the slowdown and inflation pickup would be “particularly pronounced” in emerging market and developing economies. It also warned that a longer or broader conflict could further weaken growth and destabilize financial markets. ### What should readers watch next? May and June shipping, oil and inflation data will show whether the U.N.’s warning is feeding into broader price pressures. (un.org) UNCTAD said its forecast range depends heavily on whether geopolitical tensions continue to disrupt energy flows and maritime transport through the Strait of Hormuz. The next official checkpoints are future UNCTAD trade updates and subsequent U.N. economic outlook revisions, which will show whether the 2.5% global growth forecast and 1.5%-2.5% trade-growth range hold. (imf.org) (unctad.org)