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The World Bank has issued a cautionary note regarding the global economy, predicting a slowdown in growth to 2.5% for this year. This marks the lowest growth rate since the onset of the COVID-19 pandemic, primarily driven by inflation and increased borrowing costs linked to ongoing conflicts in the Middle East. In its recent Global Economic Prospects report, the Washington-based organization has revised down the growth expectations for approximately two-thirds of nations. It anticipates that global growth will reach 2.7% by 2025 but may decline further due to persistent disruptions in energy markets and trade routes.

A significant contributor to this downgrade is the ongoing instability in the Middle East, particularly around the Strait of Hormuz, a vital shipping route for oil and other commodities. Even if supply issues improve in the near future, the World Bank forecasts that global inflation will rise to 4% by 2026, up from 3.3% last year.

The report also warns of significant increases in commodity prices, predicting that average fertilizer costs could surge by as much as 38% due to supply chain disruptions and shortages stemming from Gulf production. These challenges are expected to heavily impact food production and developing economies.

Particularly alarming is the outlook for developing nations, where many, excluding China and India, may experience a 'lost decade' characterized by stagnant income growth. The World Bank cautioned that escalating debt levels and ongoing inflation are constraining governments' abilities to respond effectively to economic shocks.

In a more pessimistic scenario, the bank indicated that global growth could plummet to just 1.3% if conflicts intensify or if commodity flows face severe disruptions. World Bank President Ajay Banga announced that the institution is preparing to allocate up to $100 billion in support over the next 15 months to assist vulnerable countries in managing the economic repercussions and maintaining stability.

The report also highlighted structural risks within the global economy, such as increasing debt burdens in developing nations and unequal access to emerging technologies like artificial intelligence, which could exacerbate the divide between affluent and impoverished countries if not addressed. Despite the bleak forecast, the World Bank identified potential long-term growth drivers, including regional trade integration, the transition to clean energy, and advancements in AI.