Global Economic Prospects, June 2026

Overview & Synopsis

The global economy is facing a major shock as the Middle East conflict drives sharp energy price increases. Global growth is projected to slow to 2.5 percent in 2026, with emerging market and developing economies (EMDEs) facing the weakest per capita income growth since the pandemic. The effects across EMDE regions differ based on direct impact of the conflict, energy exposure, and policy buffers. Risks to the outlook remain skewed to the downside and include escalating hostilities, further commodity market disruptions, and additional geopolitical strains, while broader adoption of artificial intelligence (AI) offers some upside. Policy action is critical: globally to safeguard energy and food security and advance the energy transition, and domestically to control inflation, strengthen fiscal sustainability, and support job creation through investment in physical, human, and digital capital. Compounding pressures from the energy shock, rising debt is driving up sovereign borrowing costs for EMDEs, particularly for those most indebted, underscoring the need for stronger revenue mobilization and improved debt management. Commodity-exporting EMDEs can improve their fiscal resilience by using credible fiscal rules, maintaining well-governed sovereign wealth funds, and diversifying revenue sources to better manage commodity price cycles.