The global economy has largely moved past the pandemic recession, but many fragile and conflict-affected situations (FCS) have not experienced a full recovery. Instead, these economies continue to face repeated shocks, including new global disruptions driven by conflict in the Middle East, rising energy prices, tighter financial conditions, and heightened uncertainty. As a result, the recovery gap between FCS and other emerging market and developing economies (EMDEs) has widened significantly.
Five years after the pandemic, nearly 60 percent of FCS economies still have lower real per capita income than in 2019, compared to just 18 percent of other EMDEs. Around 15 percent of the global population—over one billion people—live in FCS economies, where slow or stalled recovery has become the norm. In countries that have not recovered, income growth has remained extremely weak, leaving real incomes nearly 15 percent below pre-pandemic levels and deepening inequality between recovering and non-recovering economies.
The human impact of this stagnation is severe. A large share of the world’s extreme poor, food-insecure populations, and working-age individuals in FCS are concentrated in economies that have not regained pre-pandemic income levels. This has intensified vulnerabilities, particularly among workers and young people, and has increased exposure to poverty and food insecurity.
Several structural factors explain why many FCS economies have failed to recover. High debt levels, ongoing conflict, and frequent natural disasters have created overlapping constraints. Governments in these economies face limited fiscal space, making it difficult to invest in essential services or respond effectively to new shocks. In many cases, rising debt and weak growth reinforce each other, further restricting recovery.
Conflict remains one of the most significant barriers to economic stability. Economies affected by violence suffer from destroyed infrastructure, disrupted trade, displaced populations, and reduced private investment, with income losses often persisting for years. Natural disasters further compound these challenges, with FCS economies experiencing disproportionately high economic losses from floods, droughts, and storms due to their structural vulnerabilities and limited resilience.
Despite these challenges, FCS economies also hold significant untapped potential. Many have young and growing populations that could drive long-term growth, and a large number are rich in natural resources. If stability improves, sectors such as agriculture, tourism, and resource-based industries could support stronger economic performance.
Realizing this potential requires coordinated policy action. Strengthening institutions, preventing and resolving conflict, restoring macroeconomic stability, and rebuilding fiscal space are essential steps. Equally important is prioritizing job creation, especially for young people, through investments in infrastructure, education, regulatory reform, and private sector development.
International support will remain crucial but must be tailored to different contexts, whether economies are in active conflict, recovering from crisis, or facing emerging fragility risks. Early action, prevention, and sustained institution-building are key to avoiding long-term economic damage.
Ultimately, while repeated shocks have kept many FCS economies trapped in slow or stalled recovery, the situation is not irreversible. With strong policies, targeted investments, and sustained global support, these economies can break the cycle of fragility and build a more resilient and inclusive growth path.
