The World Bank stated that the global economy is displaying more resilience than anticipated, despite significant trade tensions and policy uncertainties. Projections indicate that global growth will maintain a relatively steady pace over the next two years, with a forecasted ease to 2.6 percent in 2026 before a slight increase to 2.7 percent in 2027. Notably, the report highlighted better-than-expected growth, particularly in the United States, contributing to the upward revision in forecasts for 2026.
The World Bank cautioned that although the global economy is resilient, the current trajectory suggests that the 2020s could be the weakest decade for global growth since the 1960s. Income disparities are widening, with most advanced economies surpassing pre-pandemic income levels while approximately one in four developing economies remains economically disadvantaged compared to 2019. Factors such as front-loading of trade, supply-chain adjustments, and easing financial conditions supported growth in 2025, but these are expected to diminish in 2026 as trade and domestic demand soften.
Projections indicate a decline in global inflation to 2.6 percent in 2026, influenced by softer labor markets and reduced energy prices. However, growth is anticipated to rebound in 2027 as trade flows adapt and policy uncertainties decrease. The World Bank’s Chief Economist and Senior Vice President for Development Economics, Indermit Gill, emphasized the need for governments to encourage private investment and trade liberalization, control public consumption, and invest in technology and education to prevent stagnation and unemployment.
Developing economies are expected to experience a slowdown in growth to 4 percent in 2026 before a modest increase to 4.1 percent in 2027, driven by factors such as reduced trade tensions, stable commodity prices, and improved financial conditions. Low-income countries are projected to grow at an average rate of 5.6 percent over 2026-27, but this growth may not be adequate to bridge income disparities with advanced economies. The report underscored the emerging jobs challenge, highlighting that 1.2 billion young individuals in developing economies will enter the workforce in the next decade, necessitating reforms to enhance productivity, business environments, and private capital mobilization.
The World Bank also raised concerns about fiscal sustainability in many developing economies, citing increased debt-servicing costs and overlapping shocks that have eroded fiscal credibility. M. Ayhan Kose, the World Bank Group’s Deputy Chief Economist, emphasized the urgency of restoring fiscal credibility, given that public debt in emerging and developing economies is at its highest level in over fifty years.
