“Despite the war with Iran and its associated oil-supply shock, consensus forecasts compiled by the World Bank predict that the global economy will grow by around 2.6 percent in 2026, roughly equal to forecasts at the start of the year.”
The World Bank explains:
“The Middle East conflict delivered one of the biggest disruptions to global oil supplies in decades. The disruption of oil shipments through the Strait of Hormuz earlier this year briefly drove Brent crude prices to nearly $120 a barrel—roughly two-thirds higher than the price on the eve of the conflict. Yet the global economy has so far escaped the steep downturn that used to accompany similar oil shocks.
Consensus forecasts now put global growth at about 2.6 percent in 2026, close to what was expected in January and above the more pessimistic projections made in the spring.”
Economists explain that
“Four factors have made the difference. First, energy markets adjusted rapidly. Inventories were drawn down, producers outside the conflict region increased exports, and weaker demand in several major economies helped limit the rise in oil prices. Second, governments acted quickly. Governments and businesses conserved energy, used strategic reserves, and switched to alternatives, including renewables and coal….Third, AI investment became a powerful engine of global demand. Large-scale capital spending in the United States has supported activity and trade. The benefits have extended to EMDEs, particularly in East Asian economies, through stronger demand for electronics and other inputs used in AI infrastructure, as reflected in the strength of global electronics manufacturing activity….New trade agreements and efforts to diversify supply chains have provided additional support.”
Record oil production is occurring in many countries outside the Persian Gulf, such as the United States, Brazil, Argentina, and Guyana.
Among the major countries with solid economic growth this year are
• India: ~6.4% growth, leading major economies through domestic demand, manufacturing, and technology.
• Indonesia: ~5.0% growth, supported by a young workforce and commodity exports.
• China: ~4.4% growth, maintaining steady performance despite structural cooling.
• Argentina: ~3.5% growth, reflecting a post-crisis stabilization and rebound.
Developing countries are also experiencing substantial economic growth, such as:
• Ethiopia: ~9.2% growth, supported by agricultural exports, coffee, gold, and structural reforms.
• Guinea: ~8.7% growth, driven by a massive bauxite and iron ore mining boom (including the Simandou project).
• Rwanda: ~7.2% growth, aided by regional stability and manufacturing expansion.
• Uganda: ~7.0% growth, bolstered by infrastructure and oil pipeline development.
