World Bank Warns Global Economy Nearing Its Most Pessimistic Growth Scenario

The World Bank warned the global economy is "a few months" from its most pessimistic growth scenario, if geopolitical tensions and supply chain disruptions persist. Indermit Gill, the World Bank's Chief Economist, stated that escalating U.S.-Iran hostilities could ignite inflation and raise interest rates, potentially dropping global growth to 1.3% from 2.9% last year. Gill, set to retire in August, explained the World Bank outlined three scenarios in its June economic outlook, citing high uncertainty over the Middle East conflict. He added the worst scenario, involving hostilities lasting six months or more, is nearing realization and could push global inflation to 4.5%. He noted that escalating Middle East conflict and continued energy supply disruptions might trigger a new inflation wave, forcing central banks to maintain high rates or raise them further. The U.S., China, and India enjoy substantial protection from conflict repercussions due to their strong economies and large domestic markets. Conversely, high-debt developing nations face greater risks from rising borrowing costs and increasing economic pressures.