Page 9 - Policy Economic Report- June'26

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

Economy in Focus

1. A snapshot of the global economy

Global Economic Outlook

Heading into the second half of 2026, the global economy will face weakening growth momentum,
persistent geopolitical uncertainty, elevated trade tensions, and tighter financial conditions. According to
the World Bank's Global Economic Prospects (June 2026), global GDP growth is projected to moderate
to 2.5 % in 2026 from 2.9 % in 2025, reflecting weakening investment, subdued productivity growth,
slowing international trade, and elevated uncertainty. The report notes that this would represent the
weakest pace of global growth outside periods of recession since the global financial crisis.

The deterioration in the global outlook has been reinforced by rising geopolitical risks, elevated energy
prices, and disruptions to global supply chains and maritime trade routes. These developments have
increased production and transportation costs, constrained business investment, and added inflationary
pressures across both advanced and emerging economies. While inflation has eased from its post-
pandemic peak, it remains above central bank targets in several countries, limiting the scope for monetary
policy easing and keeping global borrowing costs relatively elevated.

Financial conditions also remained challenging during the period. The Asian Development Bank (ADB), in
its Asia Bond Monitor (June 2026), highlighted that heightened global uncertainty, volatile capital flows,
and higher sovereign bond yields continue to weigh on emerging financial markets. Tighter financing
conditions and increased market volatility have reduced investment appetite and heightened external
vulnerabilities, particularly for energy-importing and highly indebted developing economies.

Despite these headwinds, structural drivers of long-term growth remain intact. The World Bank identified
digital transformation, artificial intelligence, and technological innovation as important catalysts for future
productivity gains, while the Tracking SDG7: The Energy Progress Report 2026 highlighted continued
global progress in renewable energy deployment, energy efficiency, and clean energy investment. These
trends underscore the growing importance of energy security and sustainability in shaping economic
resilience and future growth. Nevertheless, the pace of progress remains insufficient to achieve global
sustainable development and climate goals, reinforcing the need for accelerated policy reforms,
investment, and international cooperation.

The World Bank also highlighted that weak investment growth continues to constrain the global recovery.
Private investment remains below historical averages across many economies, reflecting elevated
borrowing costs, persistent policy uncertainty, and subdued business confidence. Slower capital
formation is expected to weigh on productivity, infrastructure development, and medium-term growth
prospects, particularly in emerging and developing economies where investment remains critical for
supporting industrialization, energy transition, and sustainable economic development.

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