World Bank trims global growth projection to 2.5%; India stays ahead

India is expected to retain its position as the world’s fastest-growing major economy even as the global outlook weakens amid rising geopolitical tensions and energy market disruptions, according to the latest assessment by the World Bank.In its updated global economic outlook released on Thursday, the World Bank projected India’s gross domestic product (GDP) growth at 6.6% in 2026, following an estimated expansion of 7% in 2025. The lender said India’s growth momentum is likely to remain strong over the coming decades, supported by domestic demand, investment and structural reforms.“Growth rates in India are expected to remain fairly high for the next two decades,” World Bank Chief Economist Indermit Gill said while discussing the report.
According to agency reports,the World Bank, however, lowered its forecast for global economic growth in 2026 to 2.5%, citing heightened geopolitical uncertainty and the economic fallout from the conflict in the Middle East. The lender warned that a prolonged disruption to global energy supplies could further weaken economic activity and intensify inflationary pressures worldwide.The downgrade reflects growing concerns over the conflict involving Iran, which has unsettled energy markets and pushed crude oil prices higher. The closure of the Strait of Hormuz has amplified worries about energy security, raising the risk of renewed inflation and tighter monetary conditions across several economies.
The report noted that growth forecasts have been revised downward for nearly two-thirds of economies worldwide. Some of the sharpest cuts were made for energy-exporting countries in the Middle East. Growth across the Middle East, North Africa, Afghanistan and Pakistan region is now projected at 1.6% in 2026, compared with 4% in 2025.Under its baseline scenario, the World Bank assumes Brent crude oil prices will average around $94 per barrel this year, representing a 36% increase from 2025 levels. It expects the most severe supply disruptions to ease by the end of July, allowing global inflation to remain near 4%.
The lender also outlined downside risks to the global economy. If supply disruptions persist and oil prices average $115 per barrel, global growth could slow to 2.1% while inflation could rise to 4.4%.In a more severe scenario involving significant financial market stress triggered by energy shocks, global growth could decelerate to just 1.3%, highlighting the vulnerability of the global economy to prolonged geopolitical instability.“These risk scenarios show how quickly the outlook could weaken if energy and financial pressure reinforce each other,” said Ayhan Kose, the World Bank’s deputy chief economist.Gill cautioned that the global economy is entering this period of uncertainty with less resilience than in previous crises.
“The world economy is a lot less resilient today than it was in 2008 and even as compared with 2018,” he said, citing persistent policy uncertainty, elevated borrowing costs and lingering inflationary pressures.Despite the softer global outlook, India continues to outperform most major economies. The World Bank expects China’s economy to grow 4.2% in 2026 after expanding 5% in 2025. Growth in the United States is projected at 2.2%, while the euro zone and Japan are expected to grow by 0.8% and 0.7%, respectively.
The report also highlighted broader challenges facing developing economies. Growth across emerging and developing markets is forecast to slow to 3.6% in 2026 from 4.4% in 2025, raising concerns about weaker income growth and slower progress in reducing poverty.Looking ahead, the World Bank expects global growth to recover modestly to 2.8% in 2027 and 2028. However, the pace is projected to remain below the average recorded during the previous decade, constrained by slower population growth, subdued investment activity, rising public debt levels and weaker trade expansion.

(Business Correspondent)