A 'lost decade' for many, but not India: World Bank pegs growth at 6.6%

The World Bank has warned that the global economy is facing another major shock, with growth expected to slow to its weakest pace since the Covid-19 pandemic, as escalating geopolitical tensions and disruptions to energy markets weigh on economic activity worldwide.

In its latest Global Economic Prospects report released on Thursday, the World Bank projected global growth at 2.5% in 2026, down from 2.9% in 2025, while cautioning that many developing economies risk enduring a “lost decade” of weak income growth and slower convergence with advanced economies.

At the same time, India continues to stand out among major economies, with the World Bank forecasting growth of 6.6% in FY2026-27 and 7.2% in FY2027-28, making it one of the fastest-growing large economies globally.

‘Lost decade’ warning for developing economies

The report struck a sombre note on the outlook for emerging markets and developing economies (EMDEs), warning that the gains made in narrowing income gaps with advanced economies are at risk.

“Barring a miracle, the 2020s will prove to be a lost decade,” World Bank chief economist and senior vice president Indermit Gill said in the report's foreword, referring to the growth prospects of many developing economies.

According to the World Bank, the conflict in the Middle East has substantially altered the global outlook by disrupting energy flows, pushing up commodity prices and reigniting inflationary pressures. About two-thirds of economies around the world now face weaker growth prospects than previously expected.

The institution noted that slower growth prospects are likely to translate into weaker investment, constrained hiring and tighter fiscal conditions, complicating efforts by governments to generate employment and sustain economic momentum.

Energy shock drives downgrade

A key concern highlighted in the report is the sharp increase in energy prices following disruptions in the Gulf region.

The World Bank expects overall commodity prices to rise by 22% in 2026, reversing earlier expectations of a decline. Brent crude oil prices are projected to average $94 per barrel, up 36% from 2025 levels and more than 50% above the Bank’s January forecast. European natural gas prices are also expected to rise by about 30%.

“The global economic outlook has shifted markedly as the conflict in the Middle East has generated major disruptions in energy markets,” the report said.

The Bank warned that prolonged disruptions to commodity flows could further intensify inflation, increase food insecurity, trigger financial stress and weaken growth prospects globally.

India remains a bright spot

Despite the challenging external environment, the World Bank maintained a relatively optimistic outlook on India.

The report forecasts India’s economy to grow 6.6% in FY2026-27, followed by 7.2% in FY2027-28. Notably, both projections are higher than the World Bank’s January estimates, with the FY2026-27 forecast revised upward by 0.1 percentage point and the FY2027-28 projection upgraded by 0.6 percentage point.

For South Asia as a whole, growth is projected at 6.3% in 2026 before improving to 6.9% in 2027, supported largely by India’s resilience.

However, the World Bank cautioned that higher energy prices, deteriorating fiscal balances and external pressures could weigh on the region’s outlook. It expects inflation across South Asia to rise in 2026 before easing over the following two years.

Downside risks remain elevated

The World Bank stressed that risks remain tilted firmly to the downside.

It warned that a renewed escalation of hostilities or more severe energy supply disruptions could push global growth down to 1.3% in 2026, nearly halving the baseline forecast. Persistent trade uncertainty, geopolitical tensions and weather-related shocks were also identified as major threats to the outlook.

“Enhanced global cooperation is needed to safeguard energy and food security, bolster the trading system, and advance the energy transition,” the World Bank said, urging policymakers to balance inflation control with measures that support economic activity and financial stability.