World Bank: More pessimistic scenario within months

The World Bank has warned that the global economy is only a few months away from its most pessimistic scenario if geopolitical tensions and supply chain disruptions continue to escalate.

Indrmit Gill, the World Bank Group’s Chief Economist, told Reuters that escalating military hostilities between the United States and Iran could ignite inflation, push up interest rates, and reduce global growth to 1.3 percent, down from 2.9 percent last year.

Gill, who is set to retire at the end of August, explained that the World Bank outlined three possible scenarios in its June economic forecasts due to the high degree of uncertainty surrounding the war in the Middle East.

In an interview with Reuters, he added that the worst-case scenario—prolonged combat lasting six months or more—is now close to materializing, with global inflation reaching 4.5 percent.

He noted that the escalation of the war in the Middle East and ongoing disruptions in energy supplies could trigger a new wave of inflation, potentially forcing central banks to keep interest rates high or raise them again.

He pointed out that the United States, China, and India are largely shielded from the war’s fallout thanks to the strength of their economies and the breadth of their domestic markets, while developing countries with high debt levels face greater risks.