The global economy is proving to be more resilient than anticipated, despite unprecedented trade disruptions and policy uncertainties. However, the recovery is uneven, with many developing nations still facing challenges worse than pre-pandemic levels, according to the latest Global Economic Prospects report from the World Bank.
Global growth is expected to remain relatively stable over the next two years, decreasing to 2.6% in 2026 before increasing to 2.7% in 2027—this represents an upward adjustment from the Bank’s June predictions. A significant part of this improvement can be attributed to stronger-than-expected growth in the United States, which contributes nearly two-thirds of the upward revision for 2026.
Nevertheless, the report warns that if current trends continue, the 2020s may be recognized as the weakest decade for global growth since the 1960s. The sluggish growth is deepening income disparities between countries: while nearly all advanced economies are projected to exceed per capita income levels from 2019 by the end of 2025, approximately one in four developing economies is anticipated to remain poorer than before the pandemic.
Growth in 2025 was bolstered by an anticipatory surge in trade preceding policy shifts and swift adjustments in global supply chains. These temporary advantages are likely to dissipate in 2026 as trade momentum and domestic demand soften. The report suggests that easing global financial conditions and fiscal expansion in several large economies may cushion the anticipated slowdown.
Global inflation is forecasted to decrease to 2.6% in 2026, driven by softened labor markets and reduced energy prices, while growth is expected to modestly improve in 2027 as trade dynamics adjust and policy uncertainty diminishes.
“With each passing year, the global economy has increasingly struggled to generate growth while becoming seemingly more resilient to policy uncertainties,” stated Indermit Gill, Chief Economist of the World Bank Group. “However, a persistent divergence between economic dynamism and resilience may ultimately jeopardize public finance and credit markets.”
He cautioned that the global economy is poised for slower growth than even during the challenging 1990s, all while facing record levels of public and private debt. To avert stagnation and unemployment, Gill emphasized the necessity for governments to liberalize trade and private investment, control public consumption, and invest significantly in education and new technologies.
Growth in developing economies is projected to slow to 4% in 2026 from 4.2% in 2025, before inching up to 4.1% in 2027 as trade tensions ease, commodity prices stabilize, and financial conditions improve. Low-income countries are expected to experience faster growth, averaging 5.6% over 2026–27, supported by stronger domestic demand and recovering exports.
Despite this, the convergence of incomes will proceed slowly. Per capita income growth in developing nations is estimated at 3% in 2026, about one percentage point below the average seen from 2000 to 2019. At this rate, per capita incomes in developing economies would remain only 12% of those in advanced economies.
The report highlights a growing challenge regarding jobs, especially in developing nations, where around 1.2 billion young individuals will enter the workforce over the next decade. Addressing this issue will necessitate a comprehensive policy approach, including the enhancement of physical, digital, and human capital; improving policy certainty and regulatory credibility to promote business growth; and mobilizing private investment on a large scale.
The World Bank also emphasized the importance of restoring fiscal sustainability in developing economies, which have been weakened by overlapping shocks, rising developmental demands, and higher debt-servicing expenses. Public debt in emerging and developing economies has now reached its highest level in over 50 years.
A dedicated section of the report delves into fiscal rules—such as limits on deficits, debt, or spending—that are currently implemented in more than half of developing economies. Nations that adopt these rules tend to see budget balances improve by an average of 1.4 percentage points of GDP after five years, according to the Bank.
“With public debt at unprecedented levels, restoring fiscal credibility has become a critical priority,” stated M. Ayhan Kose, the World Bank’s Deputy Chief Economist. “Fiscal rules can be beneficial, but their success ultimately hinges on strong institutions, credible enforcement, and sustained political will.”
