June 2026 Global Economic Prospects Executive Summary from the World Bank.
Key Takeaways
1. The Global Economy Has Been Hit by Another Shock
The conflict in the Middle East has caused energy prices to rise sharply. Higher oil and gas prices are driving global inflation and making it harder for central banks to cut interest rates.
2. Global Growth Is Slowing
The world economy is expected to grow only 2.5% in 2026, down from 2.9% in 2025. This would be the slowest growth rate since the COVID pandemic.
3. Developing Countries Are Struggling
Emerging and developing countries are expected to grow by only 3.6% in 2026, slower than last year.
People in many developing countries are experiencing slower income growth, and some nations may not fully recover the economic ground lost to the pandemic until after 2028.
4. Things Could Get Worse
The World Bank warns that several risks could make the situation worse:
More conflict in the Middle East
Higher oil and food prices
Rising inflation
Financial market stress
Trade disputes
Extreme weather events
In a worst-case scenario, global growth could fall to just 1.3% in 2026.
5. Artificial Intelligence Could Help
One positive factor is AI. If businesses adopt AI effectively, productivity and economic growth could improve.
What Governments Need to Do
The report says governments should:
Protect food and energy supplies
Control inflation
Keep government debt under control
Maintain financial stability
Invest in infrastructure
Improve education and workforce skills
Encourage private-sector investment and job creation
Government Debt Is Becoming a Major Problem
One of the report's special studies focuses on government debt.
The World Bank found that:
Higher government debt usually leads to higher interest rates.
Higher interest rates make borrowing more expensive.
Countries with large debt loads are more likely to face financial problems.
Since 2010, rising debt levels in developing countries have already pushed borrowing costs noticeably higher.
Countries Most at Risk
Debt problems are worse for countries that have:
Previously defaulted on debt
Low credit ratings
Weak government institutions
Large amounts of short-term debt
Commodity Exporters Face Special Challenges
The second study examines countries that rely heavily on commodities such as:
Oil
Natural gas
Metals
Agricultural products
The report finds that many commodity-exporting countries spend excess revenue during boom periods rather than save it. When prices fall, government finances often suffer.
Oil Exporters vs Agricultural Exporters
Oil and metal exporters
Usually improve finances during commodity booms.
Debt often falls during good times and rises during downturns.
Agricultural exporters
Often increase spending during good times.
Tend to accumulate more debt over time.
What This Means for Iraq
For Iraq and other oil-producing nations, the report carries an important message:
High oil prices can boost government revenue.
But governments should save part of those windfalls rather than spend it all.
Strong fiscal rules, sovereign wealth funds, and debt management are essential to avoid future financial problems.
Diversifying the economy beyond oil remains critical for long-term growth and job creation.
Summary
The World Bank believes the global economy is slowing because of the Middle East conflict, higher energy prices, and growing debt burdens, and it warns that countries—especially developing and commodity-exporting nations—must strengthen their finances and create jobs while preparing for an AI-driven future.
