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. Global growth is projected to remain broadly steady, easing to 2.6% in 2026 before rising slightly to 2.7% in 2027, representing an upward revision from earlier forecasts. This resilience is largely driven by better-than-expected performance in the United States, which accounts for about two-thirds of the upward adjustment. Nevertheless, the 2020s are on track to be the weakest decade for global growth since the 1960s, widening income gaps between advanced and developing economies. By the end of 2025, nearly all advanced economies had per capita incomes exceeding 2019 levels, while around one in four developing economies had not recovered to pre-pandemic levels.
In 2025, growth was supported by a surge in trade ahead of policy changes and rapid adjustments in global supply chains. These factors are expected to moderate in 2026 as trade and domestic demand soften. However, easing global financial conditions and fiscal expansion in several large economies are expected to cushion the slowdown. Global inflation is projected to decline to 2.6% in 2026 due to softer labor markets and lower energy prices. Growth is anticipated to pick up in 2027 as trade flows stabilize and policy uncertainty diminishes.
Developing economies are projected to see growth slow to 4% in 2026 from 4.2% in 2025 before edging up to 4.1% in 2027, driven by easing trade tensions, stabilized commodity prices, improved financial conditions, and stronger investment flows. Low-income countries are expected to grow faster, averaging 5.6% over 2026–27, supported by recovering domestic demand, exports, and moderating inflation. Despite this, the income gap with advanced economies will remain wide, with per capita income growth in developing economies projected at just 3% in 2026, about one percentage point below the 2000–2019 average. At this pace, per capita income in developing economies will remain only about 12% of that in advanced economies.
The report highlights a looming challenge for job creation, especially in developing economies where 1.2 billion young people will enter the workforce over the next decade. Addressing this challenge requires a comprehensive policy effort focused on strengthening physical, digital, and human capital to boost productivity and employability, improving the business environment to enhance policy credibility and regulatory certainty, and mobilizing private capital at scale to support investment. These measures aim to shift job creation toward more productive, formal employment, supporting income growth and poverty reduction.
Fiscal sustainability is another critical concern, as recent shocks, growing development needs, and rising debt-servicing costs have strained public finances in developing economies. The report highlights the role of fiscal rules, which set limits on government borrowing and spending to stabilize public finances. Economies with fiscal rules typically see improvements in budget balances and greater resilience to external shocks. However, the effectiveness of these rules depends on institutional strength, the economic context, and political commitment to enforce them. With public debt at its highest level in over half a century in many emerging and developing economies, restoring fiscal credibility remains an urgent priority to support growth and financial stability.
