World Bank Warns Inflation in Developing Economies Could Exceed 5% amid Commodity Crisis

The World Bank warned that inflation across developing economies is expected to rise above 5% this year, as escalating energy, food, and fertilizer prices triggered by geopolitical tensions in the Middle East continue to place growing pressure on vulnerable markets.

Speaking during the “Talking Development” program, Ayhan Kose, Deputy Chief Economist at the World Bank, said the institution had initially projected inflation in developing economies to decline to around 4% in 2026. However, the recent surge in global commodity prices has significantly altered those expectations and intensified concerns over the economic outlook for emerging markets.

Kose explained that food and energy remain among the largest components of consumer spending baskets in developing countries, meaning that sustained increases in their prices directly affect household purchasing power and living standards, particularly among lower-income populations.

The World Bank also revised downward its growth forecast for developing economies, cutting projections to 3.6% from an earlier estimate of 4%. According to the bank, nearly 70% of emerging economies are now expected to experience slower economic growth this year, raising concerns over weakening investment activity and reduced job creation across multiple regions.

The institution warned that persistent inflationary pressure could further complicate economic recovery efforts, especially for countries already struggling with fiscal constraints and external financing pressures.

In response to the worsening commodity environment, the World Bank urged governments to adopt targeted and temporary fiscal measures designed to ease the impact of rising prices on households and businesses without undermining long-term financial stability.

Kose cautioned against imposing food export restrictions, arguing that such policies often deepen supply disruptions and contribute to additional price increases both domestically and internationally. He noted that while some governments tend to resort to export controls during periods of crisis, these measures frequently intensify volatility across global commodity markets rather than contain it.

The World Bank stressed that state support programs should focus primarily on the most vulnerable social groups, while ensuring that emergency interventions remain temporary in order to avoid placing excessive pressure on already limited fiscal resources.

The institution also framed the current crisis as an opportunity for structural reform, calling on developing countries to rethink long-term growth strategies through increased investment in infrastructure, human capital, and private-sector development.

According to the bank, improving business environments and mobilizing both domestic and foreign investment will be critical to strengthening economic resilience, supporting employment creation, and enabling developing economies to better withstand future global shocks.