Shantanu Mukherjee (DESA) and Ingo Pitterle(DESA) on the World Economic Situation and Prospects as of mid-2026 - Press Conference

Good afternoon.
Thanks for joining us for the launch of the World Economic Situation and prospects as of mid 2026.
This UN report provides the latest assessment of the global economic situation.
I am Sharon Bush from the UN Department of Global Communications, and I'm pleased to welcome our guests, two colleagues from the UN Department of Economic and Social Affairs, Mr.
Chantino McCurch who's the Director of the Economic Analysis and Policy Division, and Mr.
Ingo Pitily, officer in charge of the Global Economic Monitoring Branch.
Mukes will give introductory remarks after which Mr.
Pit will carry us through a presentation of the main findings.
You have the floor.
Thank you, Sharon.
Good afternoon, everybody.
What began as a blow to energy markets on the 28th of February has turned into a broader supply shock of uncertain scope, magnitude, and duration that is rippling across the world.
In the space of just 11 weeks or so, this has forced us to revise our earlier forecasts for global GDP growth downwards to 2.5% in 2026 and 2.8% in 2027.
Now, I want to be clear that these numbers are representing a baseline scenario where the impacts, although severe, are relatively contained.
In this setting, we assume that oil prices begin to ease in the second half of the year and that some of the impacts are relatively cushioned by country specific factors such as the drawing down of reserves or stockpiles in major economies.
In a more adverse scenario, global growth falls to only 2.1% in 2026, one of the weakest outcomes since the beginning of this century outside of the COVID 19 pandemic and the global financial crisis.
Now, you can just see by this range that we are playing with or that we are forecasting that forecasting the global economy has never really been an exact science, but our numbers right now are coming with a significant amount of uncertainty attached.
Uncertainty, as we have discussed earlier with you in the room, colleagues, in and of itself is a significant drag on the economy.
Beyond that, though, some points are already pretty clear.
First, growth expectations which were already muted at the beginning of the year are now still weaker.
Even in our baseline forecast, global growth in 2026 is expected to be 0.7 percentage points below the average from the pre pandemic decade.
Second, developing countries are being hit harder.
Their growth in 2026 is projected to be a full 1.3 percentage points below the pre pandemic norm.
Our report examines the channels through which such impacts are taking place and how they affect different countries and regions.
I would also like to draw your attention to what the mid year update is saying about inflation.
After three years of easing price pressures, we are seeing a reversal.
Global inflation is projected to rise to 3.9% this year, which is 0.8 percentage points higher than we had anticipated in January.
Increased energy prices are a important factor as are the prices of refinery products that are crucial to industrial production and commercial transport.
This increase is not uniform.
Countries differ in their degree of exposure as well as in structural features of their economies.
The largest upward divisions are in South Asia where inflation is expected to be up by 5.1 percentage points, and in Western Asia expected to be up by 3.4 points since January.
Now, what does this mean in practical terms? Higher prices are eroding real incomes, reducing purchasing power, and raising costs for businesses.
In the short term, this could push more people into poverty, bringing affordability once again to the fore for families and policymakers.
Over the medium term, the risks could be even more serious.
For example, fertilizer prices, specifically urea, have risen by over 60%.
If farmers respond by cutting back on usage during growing periods, we could see lower crop yields placing further pressure on food prices down the line.
Higher costs for freight and industrial processes could generate more diffuse inflation pressures that affect core inflation and inflationary expectations, and there are key consequences for monetary policy.
Rising inflation has interrupted plans by many central banks to lower interest rates and could even lead to their being raised.
This means that borrowing costs are likely to remain elevated for households, for businesses, for governments.
Crucially, the decisions that systemically important central banks take in this regard will spill over to affect financing conditions across the world.
Such headwinds are going to translate into a three way squeeze on public finances.
First, slower growth results in revenue falling short of expectations.
Second, fiscal space is further narrowed as countries seek to shield their populations from high energy prices through fuel price subsidies or tax cuts.
Third, higher borrowing costs mean that a larger share of revenues are going to be earmarked for payments on debt.
Taken together, these are going to further constrain what is available for investing in the SDGs and in strengthening economies for a future that's already shaping up to be one marked by several challenges, including the potentially disruptive impacts of AI.
Our update highlights that though prospects are somber, there are concrete areas where international cooperation makes a difference.
Countries face a renewed impetus for establishing resilience, whether these be through investing in renewable energy and energy efficiency, diversifying their economies, making targeted sectoral interventions, or improving mobilization and use of resources.
All of these are shared priorities that the international system and the UN can help support.
I will now hand over to Ingo for a more in depth look at our update.
Good afternoon, everyone, and thank you, Chananau.
You've just outlined the big picture, the headline numbers, the scale of the shock, the key downside risks.
I want to focus on the regional and distributional dimensions, how growth prospects differ across regions, how the energy shock is affecting inflation and development, and the main policy challenges governments face as a result.
But before I do that, one important caveat.
The policies are shifting faster than the forecast cycles can capture and that makes it harder than usual to make projections with confidence.
The numbers we present today reflect our best assessment, but the range of plausible outcomes remains unusually wide.
The crisis in the Middle East is, of course, a major near term shock, and it will widely take center stage in what follows, but it's not the only force shaping the global outlook.
There are other headwinds and also some tailwinds that matter too.
Throughout, I will keep returning to two points.
First, the human and development costs go well beyond what any growth or inflation figure can capture.
Second, this crisis does not arrive in isolation.
It follows a series of shocks in recent years, each leaving parts of the world economy more vulnerable than before.
Before turning to the regional picture, let's recall where we started.
The global economy entered 2026 with some momentum.
Growth in late 2025 came in stronger than we had expected.
Household demand remained resilient in many parts of the world, and the AI boom supported trade, which was especially benefiting Asian economies.
The Middle East conflict has changed that picture sharply.
What makes the shock so difficult to absorb is the range of transmission channels, trade disruptions, energy and commodity prices, tourism and travel flows, tighter financing conditions, and mounting pressure on public finances.
Ultimately, the impact on each economy will depend on two things how exposed it is to these channels and how much room for policy response it has.
The top panel on this slide shows growth in 2025 and 2026.
The bottom shows how our 2026 forecasts have shifted since January.
Among developed economies, the growth forecast for the United States remains broadly unchanged at 2% in 2026.
Here, domestic energy production limits its direct exposure to the spike in prices, consumer spending is still firm and AI related investment continues to support growth.
Europe is more directly exposed to the energy disruptions, and we have accordingly revised down what was already a subdued outlook.
Japan faces similar challenge.
With low energy self sufficiency, it is vulnerable to both supply disruptions and sustained price increases.
For the economies in transition, the aggregate forecast is broadly unchanged, but this masks a clear divergence.
We're seeing robust growth in many countries in the Caucasus in Central Asia and weaker performances in other parts.
Turning to developing regions, the impact on developed economies appears limited for now, developing regions are bearing a heavier burden and the divergence across them is pronounced.
Western Asia is hardest hit with a 2.7 percentage point downgrade in 2026 growth.
The shock is most direct here.
Infrastructure damage, disrupted output, and the collapse of tourism are all weighing on activity with little sign of near term stabilization.
South Asia is also significantly affected with 2026 growth revised down by one percentage point.
As a large net energy importer, the surge in oil and gas prices is increasing production costs, widening current account deficits, and intensifying pressure on public finances.
For Africa, the LLCs, and the small island developing states, the headline revisions look modest, but they hide severe underlying pressures and vulnerabilities in many economies.
Import bills are rising sharply, fertilizer prices threaten, food security and high borrowing costs and limited fiscal space mean that governments have very little room to cushion the blow.
In East Asia and Latin America, projections remain broadly unchanged.
Several East Asian economies have ample policy space while Latin America's direct exposure to the conflict is smaller.
But the risks for both regions are clearly to the downside.
A prolonged disruption of energy flows or tighter global financial conditions could quickly change that outlook.
If the growth picture is concerning, the inflation picture is in some ways even more immediately pressing.
We have to understand that the price shock is landing much faster than the output shock and for many households is already being felt.
As the figure shows, we have revised our 2026 inflation forecast up moderately for developed economies, but more significantly for economies in transition and developing economies.
Worldwide, we have lifted our inflation projections for 2026 in nine out of ten countries.
The global disinflation trend we had welcomed at the start of the year has not just stalled, it has gone into reverse and the burden is falling hardest on those least able to absorb it.
Poor households spend a larger share of their income on food and energy, precisely the categories most affected, and they have the least capacity to adjust and there's no quick resolution inside.
Energy costs feed into fertilizers and food supply chains with a lag, so price pressures will likely persist well beyond the immediate shock.
High inflation also means that interest rate cuts are off the table in many countries.
Borrowing costs are rising, bond yields have moved up and financing conditions are tightening at a moment when many developing economies can least afford it.
This is where the aggregate numbers connect to what actually matters, people's lives and the sustainable development agenda.
A headline growth downgrade of just 0.2 percentage points understates the human cost considerably.
The most immediate concerns are related to poverty and food security.
In many of the most vulnerable economies, recovery from the pandemic and the cost of living crisis remained incomplete and this shock threatens to set progress back again.
The distributional effects are severe.
Women are disproportionately affected by energy and food insecurity and fiscal tightening risks further strain on social and development programs.
The implications for the climate transition are mixed.
Some governments facing supply disruptions may turn temporarily to other fossil fuel sources to meet their energy demands.
But the broader lesson is clear, reducing reliance on volatile fossil fuel markets through investment in renewables and diversification is now more urgent than ever.
The risks to the outlook are clearly tilted to the downside.
If the conflict proves more prolonged or escalates further, energy disruptions could deepen sharply.
Oil inventories are already falling quickly, and this means the buffer that has so far cushioned the initial shock is eroding.
The economic consequences of a disruption lasting several months would be significantly more severe than our baseline scenario implies, hitting energy importing developing countries hardest.
An even deeper energy shock could also unsettle financial markets, driving capital outflows, currency pressures, and tighter financing conditions that would in turn amplify the economic damage.
Turning to policy, there are no easy options.
Central banks face a dilemma.
Tightening monetary policy to contain prices risks slowing growth further while easing could let inflation become entrenched.
Fiscal policy is equally constrained.
Fiscal space is highly uneven and for many energy importing developing economies, the trade off between providing short term relief and maintaining debt sustainability is increasingly difficult to manage.
And that's why international cooperation is all the more vital to help stabilize energy markets, reduce uncertainty, and mobilize greater financial support for the economies most at risk.
Such a cooperation can ease near term pressures, safeguard development gains, and strengthen confidence in an increasingly volatile environment.
Thank you for your attention, and I invite everyone to explore the full world economic situation and prospects 2026 update, which is now available online.
Thanks so much, De please.
Thank you very much on behalf of the United Nations Correspondent Association for doing this briefing.
My name is Edith Lettera from the Associated Press.
I have a very short important question.
How close is the world to a recession? I leave this to you both.
Thank you.
Even in our adverse scenario, we're not foreseeing a contraction, which is what a recession would be.
So I think the answer is that we are not close.
But even without a recession, for the many reasons we've just discussed, life can get harder for billions of people and individual economies can contract.
So the world as a whole may maintain even keel, even grow, but individual economies can be under threat and can fall into recession or have long term impacts on the well being of the people.
I can just add just to put it into perspective, since 2000, the world economy had basically two recessions, one during the global financial crisis and the other one during the COVID crisis when the global economy was contracting.
In our downside scenario, which has 2.1% growth, that would be among the lowest numbers outside these recession periods.
Are there any more questions? Shia, please go ahead.
Thank you.
Yoshida Singh with Press Trust of India.
My question is on the outlook for India.
The report maintains that India remains one of the fastest growing economies, and the growth projected is at 6.4%.
What are some of the reasons that you attribute to this growth and going forward, what are some of the strengths and challenges that India needs to address in this volatile environment? Thank you.
So we have seen structurally very robust growth in India, which has been driven by consumer demand, by public investment, but also by strong performance in services exports.
And these main drivers will largely remain intact.
So, um, India will clearly remain one of the fastest growing economies in the world.
However, the country is, of course, not immune to these challenges.
It is a large energy importer and it is also exposed to other channels, for example, remittances, add to some vulnerability.
Also, a global financial tightening will make monetary policy more complicated.
And we have to understand that this shock um, for all countries is having this dual impact on the growth.
It is often lowering growth, while at the same time, it is pushing up inflation, and in doing so, it is constraining the policy space, and this will also be the case, um, for India.
So, um, the question then remains, how will the central bank and also the fiscal authorities, um, respond to that.
So we do acknowledge some vulnerabilities and risks going forward, but in our baseline, we assume, what I would characterize, solid growth of around 6.46 0.5%.
Let me just add that, you know, back in January, we were expecting quite significantly more growth for India.
So this is a downgrade.
India is a large economy, well diversified.
There have been some structural changes recently, improvements in our tax revenues, et cetera, are collected.
Inflation has been holding steady below central bank targets.
All of these are tilted towards the downside now, but still within the capacity of the country itself.
One factor that is, I think important for many countries that rely on exports to keep in mind is that when import costs go up, these are going into producing your exports into your manufacturing, your exports could also suffer because import costs are going up.
I think this is a longer term structural issue that you may begin to see play out when things like freight costs or logistics costs or industrial petrochemicals that we don't often think about like NAFTA, or diesel fuel, start increasing the cost for businesses.
That's why we think that looking not just at the consumer price index, but the producer price index is important to get a gauge on what's going on.
Having said that, like many other large economies, India has some space to manage these, which is why I think we've been saying all along that a lot depends on whether you can manage these shocks within existing buffers before your inventories, your fiscal space, et cetera run out.
That's crucial.
Thank you.
Thank you, Stefano, please go ahead.
Thank you very much, Stephanie Avaris Laboue in New York.
I heard you saying that the consequences are at the moment, the harshest consequence economically in Europe and Japan, I think for energy.
Well, my question is, is there a lose lose game here and the world at the moment from this conflict, some more, some less, but everybody is losing or there is some country that actually is making money or actually more the conflict go on and through your statistic, you see that there is somehow some way some growth.
Can you tell us the country or countries there at the moment are profiting from this situation? I don't think any country enters into conflict with a view from making a profit.
But clearly in economics, there are always winners and losers.
And for example, if you look at how energy companies stocks have been trading, the first quarter energy companies' profits were already showing substantial windfall gains.
And I note from our monitoring of this area that six leading European oil majors were reporting profits of about 22 billion in the first quarter of 2026, the 43% higher than the same period in 2025.
But having said that, these high prices are also what brings supply and demand into equilibrium and high prices in one area can stimulate more production in that area.
It's not an unmitigated disaster, I would say.
It's the way how the market works here and consequences are painful, but the equilibrium is eventually hopefully reached.
We can go about Japan, may have more insight or Europe.
You know, just to clarify that the impacts of this crisis are most severe in developing regions, specifically, of course, those most affected.
And In the group of developed economies, we see that Japan and Europe are more exposed than other developed economies, including the United States.
That was the point here.
Make.
What matters is along the lines of what Chanan had mentioned is that we're seeing also some redistribution within countries where Um, consumers are really hurt.
I mean, that's why when in nine out of ten countries, inflation is going to be higher than what we had expected in January, and this coming on top of the cost of living crisis which we had seen in the past few years, which had not ended.
I mean, in many countries, inflation was higher than what had been what central banks had hoped for.
So that creates a very challenging situation.
Okay.
Thank you.
Please.
Go ahead.
Thank you so much for the presentation.
This is Lei Zu with China Central television.
So you've talked about the baseline scenario and the more adverse scenario.
My question is what specific development could push the global economy from the baseline scenario to the more adverse scenario? Thank you.
When we create these models, we always try to present a simplified view of the world.
There can be many things which go wrong or many things which go well.
But in our model, we find it easiest to capture this going from this baseline to the adverse through oil prices remaining higher for longer.
And in our model, this is what triggers the change, and we think this is also a realistic way to look at things because oil prices are certainly an important driver of what we see, and these are monitored regularly.
But there could be other shocks and impacts as well that could trigger a more adverse outcome, but those would be outside of our model.
So it's oil prices remaining higher for longer.
80.
You said that in India, it will remain one of the fastest growth countries.
What about China in terms of growth? Because it's also always been, at least in recent years, a very high growth country.
So we are expecting growth in China to moderate from 5% last year to 4.6% in 2026.
We do see that there are some headwinds, both on the domestic side, continued on the property sector, also some slowing export growth, which was very dynamic, last year.
But at the same time, we also notice that there is a lot of policy space still available for China, which is being used to strengthen investment, but also on consumer demand.
And also, China is to some extent less immediately exposed to the Middle East energy transitions because of its special energy mix, which the country doesn't rely as heavily on oil as other countries do.
And also, it has ample strategic reserves.
Um, now, again, the question for China, similar to the case of India and other countries is just, how long will this conflict and the impact of the conflict last because all these different buffers are clearly limited.
So that's why are buffers.
And that will determine the outcome.
But what we have in our baseline is 4.6% growth of China.
Are there any questions online Nothing in the room.
If not, we just wish to thank our guests for briefing on this report and we thank you for joining.
Have a great afternoon.