The Organisation for Economic Co-operation and Development (OECD) has raised alarms about a downturn in global economic growth forecasts, indicating that the persistent conflict in the Middle East could adversely impact the global economy. In its latest report, the organization anticipates that global growth will decrease to 2.8% in 2026, down from its previous forecast of 2.9%.
Furthermore, the OECD emphasized that if the conflict continues into 2027, growth could plummet to 2.1%, representing a significant decline compared to the average annual growth rate of 3.4% recorded between 2013 and 2019, prior to the COVID-19 pandemic.
Event Details
In the report, the OECD's Chief Economist, Stefano Scarpetta, noted that the economic impact of the conflict could worsen if disruptions persist for an extended period. He pointed out that many countries might face economic recession, as weak investment, particularly in energy-intensive industries and artificial intelligence, is expected to lead to rising unemployment rates.
The report also highlighted the sharp increase in commodity prices due to tensions in the Middle East, with natural gas prices in Asia rising by 80.8% and in Europe by 43.2%, alongside increases in oil prices and fertilizer-related products.
Background & Context
These forecasts come at a time when the global economy is facing significant challenges, including rising energy prices and persistent inflationary pressures. These factors have particularly affected developing countries, which heavily rely on energy and food imports, thereby increasing the financial burdens on households.
Even if the conflict were to end in the coming weeks, the OECD expects global inflation to rise to 4.0% this year, compared to 3.4% in 2025. High energy costs and rising industrial production expenses are anticipated to exert additional pressure on prices.
Impact & Consequences
Central banks are facing significant challenges in balancing support for economic growth through interest rate cuts with the need to contain inflation. Most central banks are expected to maintain stable interest rates until 2026, amid concerns that inflation expectations may unravel.
In the Eurozone, growth is expected to be modest, as the economy is under considerable pressure due to high natural gas prices. The OECD projects that the Eurozone's GDP will grow by 0.8% in 2026, down from 1.4% in 2025.
Regional Significance
These forecasts directly impact Arab countries, many of which rely on oil and gas exports. If energy prices continue to rise, this could exacerbate economic conditions in energy-importing nations, increasing pressure on households and affecting social stability.
These challenges present an opportunity for Arab countries to reassess their economic strategies and diversify their income sources, especially in light of the global shift towards renewable energy and modern technologies.