World Bank President Ajay Banga told Reuters in an interview on Friday that even if US President Donald Trump’s declared ceasefire is implemented, the Middle East conflict will have a domino effect on the world economy.
And if the ceasefire fails and the battle intensifies, the damage will be much greater, he added. The global economy might be reduced by 0.3 to 0.4 percentage points in a baseline scenario with an early conclusion to the war, and by up to 1 percentage point if it continues, according to Banga on Tuesday. According to him, inflation might rise by 200 to 300 basis points, with a significantly greater impact of up to 0.9 percentage points if the conflict goes on.
According to the World Bank’s baseline estimate, growth in emerging markets and developing countries is now expected to be 3.65% in 2026, down from 4% in October and as low as 2.6% in the worst case scenario of a protracted conflict. Previously predicted at 3%, inflation in those nations was now expected to reach 4.9% in 2026. According to projections accessed by Reuters, inflation might rise as high as 6.7% in the worst case.
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