A senior World Bank official warned that the escalating conflict between the United States and Iran could push global economic growth down to just 1.3 percent this year by driving up inflation and interest rates.
In a media interview on Wednesday, Indermit Gill, Chief Economist of the World Bank Group and Senior Vice President for Development Economics, said the bank's June economic forecast modeled three scenarios based on the high uncertainty surrounding the Middle East conflict. The worst-case scenario, in which hostilities continue for six months or longer, is now close to becoming reality, he said.
Under this scenario, global inflation would reach 4.5 percent this year. Gill warned that a prolonged conflict and damage to oil infrastructure in the Middle East would also disrupt the transport of fertilizers, helium and sulfur, key inputs for agriculture, worsening food insecurity and triggering a chain reaction. Once inflation accelerates, highly indebted countries could face severe debt servicing problems within months, he added.
In its June Global Economic Prospects report, the World Bank projected global growth would slow from 2.9 percent in 2025 to 2.5 percent in 2026. If the U.S.-Iran conflict further deteriorates, growth could slide further to 1.3 percent, the bank cautioned.
