The global economy has shown notable resilience over the past year despite trade tensions, shifting policies, and geopolitical uncertainty. However, growth remains weak and well below pre-pandemic levels, according to the UN’s flagship World Economic Situation and Prospects 2026 report, released on Thursday.
The report projects global economic growth of 2.7 per cent in 2026, slightly below the 2.8 per cent recorded in 2025 and far under the pre-pandemic average of 3.2 per cent.
While the sharp rise in United States tariffs created new trade frictions, the absence of broader escalation helped prevent major disruptions to global commerce, the report noted.
Resilience masks deeper vulnerabilities
Short-term resilience has been supported by solid consumer spending, easing inflation, and looser financial conditions. Yet the UN warns that structural weaknesses persist.
Low investment levels, tight fiscal space, and elevated uncertainty could lock the global economy into a prolonged period of slower growth than before the COVID-19 pandemic.
Although trade tensions have eased somewhat, the full impact of higher tariffs and macroeconomic uncertainty is expected to become more visible in 2026.
Financial conditions have improved due to monetary easing, but risks remain high—particularly from elevated asset prices, especially in sectors linked to rapid advances in artificial intelligence (AI).
Developing countries under pressure
High debt levels and borrowing costs continue to constrain many developing economies.
UN Secretary-General António Guterres warned that:
“A combination of economic, geopolitical and technological tensions is reshaping the global landscape, generating new economic uncertainty and social vulnerabilities.”
He cautioned that many developing countries are still struggling, putting progress toward the Sustainable Development Goals (SDGs) at serious risk.
Uneven regional outlook
The report highlights significant regional disparities:
- United States: Growth projected at 2.0% in 2026 (up from 1.9% in 2025), supported by monetary and fiscal easing, though labour-market softening may weigh on momentum.
- European Union: Growth expected at 1.3%, down from 1.5%, as higher US tariffs and geopolitical uncertainty weaken exports.
- East Asia: Growth projected at 4.4%, down from 4.9%, with China expected to grow 4.6%, supported by targeted policy measures.
- South Asia: Growth forecast at 5.6%, led by India’s 6.6% expansion, driven by strong consumption and public investment.
- Africa: Output projected at 4.0%, a slight improvement, but debt and climate shocks remain major risks.
- Latin America & Caribbean: Growth expected at 2.3%, reflecting moderate consumer demand and cautious investment recovery.
Trade slows as uncertainties persist
Global trade expanded by a stronger-than-expected 3.8 per cent in 2025, driven by early shipment front-loading and robust services trade. However, momentum is expected to slow, with trade growth projected at 2.2 per cent in 2026.
Investment remains subdued across most regions due to geopolitical tensions and limited fiscal capacity, though AI-driven capital spending has boosted investment in some large economies.
The report cautions that AI-related gains may be unevenly distributed, potentially widening existing inequalities.
High prices still hurting the vulnerable
While inflation continues to decline globally, high prices remain a major challenge.
- Headline inflation fell from 4.0% in 2024 to 3.4% in 2025
- It is projected to ease further to 3.1% in 2026
Despite this trend, Junhua Li, UN Under-Secretary-General for Economic and Social Affairs, warned:
“Even as inflation recedes, high and still rising prices continue to erode the purchasing power of the most vulnerable.”
He stressed the need to protect essential spending, strengthen competition, and address the structural causes of recurring price shocks.
Call for coordinated global action
The report urges stronger international coordination to address trade realignments, persistent inflation pressures, debt vulnerabilities, and climate-related shocks.
It highlights that poorer countries, landlocked developing States, and small island developing States remain especially constrained and require greater international support.
As a roadmap, the report points to the Sevilla Commitment, adopted at the Fourth International Conference on Financing for Development, as a blueprint for:
- Reforming the global financial architecture
- Scaling up development finance
- Strengthening multilateral cooperation
