Bretton Woods institution, World Bank
The global economy is showing greater resilience than expected despite ongoing trade tensions and policy uncertainty, according to the World Bank’s latest Global Economic Prospects report.
According to the report, global growth was projected to remain broadly stable, easing to 2.6 per cent in 2026 before rising slightly to 2.7 per cent in 2027, an upward revision from the Bank’s June forecast.
It said in developing economies, growth was expected to slow to four per cent in 2026 from 4.2 per cent in 2025, before edging up to 4.1 per cent in 2027 as trade tensions ease, commodity prices stabilise, and financial conditions improve.
The report indicated that low-income countries are projected to grow faster, averaging 5.6 per cent in 2026–27, supported by firm domestic demand, recovering exports, and moderating inflation, adding that even so income gaps would persist: per capita income growth in developing economies is forecast at 3 per cent in 2026, leaving their income levels at just 12 per cent of those in advanced economies.
The report said much of the improved outlook reflected stronger-than-anticipated growth, particularly in the United States, which accounted for roughly two-thirds of the upward revision for 2026.
Nevertheless, the report cautions that if current forecasts hold, the 2020s would become the weakest decade for global growth since the 1960s.
“The slow pace of growth is widening disparities in living standards. By the end of 2025, nearly all advanced economies had per capita incomes above pre-pandemic 2019 levels, while about one in four developing economies remained below those levels,” the report said.
It said growth in 2025 was supported by a temporary surge in trade ahead of anticipated policy changes and rapid adjustments in global supply chains.
“These factors are expected to fade in 2026 as trade momentum and domestic demand weakens. However, easing global financial conditions and fiscal expansion in several large economies should help cushion the slowdown. Global inflation is projected to decline to 2.6 per cent in 2026, reflecting softer labor markets and lower energy prices. Growth is expected to strengthen again in 2027 as trade flows adjust and policy uncertainty diminishes,” the report said.
2026 is a year of consolidation, disciplined markets – BoG Governor.
Those trends, the report said posed a major employment challenge, as 1.2 billion young people in developing economies are expected to enter the workforce over the next decade.
It called for a comprehensive strategy focused on strengthening physical, digital, and human capital; improving the business environment through policy credibility and regulatory certainty; and mobilising private investment at scale.
The report also emphasised that their success depends on strong institutions, credible enforcement, and political commitment.
Commenting on the report, , the World Bank Group’s Chief Economist, Indermit Gill, said “With each passing year, the global economy has become less capable of generating growth and seemingly more resilient to policy uncertainty.”
He warned, however, that weak growth combined with record public and private debt could strain public finances and credit markets.
To avoid stagnation and joblessness, Gill urged governments to liberalise trade and private investment, curb public consumption, and invest in technology and education.
The World Bank Group’s Deputy Chief Economist and Director of the Prospects Group, M. Ayhan Kose, said “With public debt in emerging and developing economies at its highest level in more than half a century, restoring fiscal credibility has become an urgent priority.”
He said “Well-designed fiscal rules can help governments stabilise debt, rebuild policy buffers, and respond more effectively to shocks. But rules alone are not enough: credibility, enforcement, and political commitment ultimately determine whether fiscal rules deliver stability and growth.”
