Thursday, 15 January 2026
The global economy is expected to maintain a steady pace of growth over the next two years despite ongoing trade tensions and policy uncertainty, according to the latest Global Economic Prospects report from the World Bank.
Global growth is forecast to ease to 2.6% in 2026 before rising slightly to 2.7% in 2027, representing an upward revision compared with the Bank’s mid-2025 outlook. The improved forecast reflects stronger-than-anticipated performance in several major economies, with the United States accounting for a large share of the upward revision.
Despite this resilience, the report notes that the 2020s remain on course to be the weakest decade for global growth since the 1960s. The slower pace is contributing to widening income disparities. By the end of 2025, most advanced economies had recovered to levels above their 2019 per capita incomes, while around one quarter of developing economies remained below pre-pandemic levels.
Growth in 2025 was supported by a temporary rise in global trade ahead of policy changes and rapid adjustments in supply chains. These factors are expected to diminish in 2026 as trade activity and domestic demand moderate. At the same time, easing financial conditions and fiscal expansion in several large economies are expected to help offset the slowdown. Global inflation is projected to decline to 2.6% in 2026, driven by softer labour markets and lower energy prices, with growth expected to strengthen in 2027 as trade patterns stabilise and uncertainty recedes.
According to Indermit Gill, the global economy has shown an increasing ability to absorb policy shocks, but this resilience is accompanied by weakening growth momentum. He warned that sustained low growth alongside high levels of public and private debt could place pressure on public finances and credit markets, underscoring the need for reforms to support investment, productivity and education.
In developing economies, growth is projected to slow to 4% in 2026 from 4.2% in 2025, before edging up to 4.1% in 2027 as trade tensions ease and financial conditions improve. Low-income countries are expected to grow faster, averaging 5.6% over 2026–27, supported by firmer domestic demand and recovering exports. Even so, per capita income growth in developing economies is forecast at around 3% in 2026, below its long-term average, leaving incomes at roughly 12% of levels in advanced economies.
The report highlights the challenge of job creation in developing regions, where an estimated 1.2 billion young people will enter the labour force over the next decade. It argues that addressing this pressure will require investment in infrastructure and skills, improvements in the business environment, and greater mobilisation of private capital.
The World Bank also points to growing fiscal pressures in developing economies, where public debt has reached its highest level in more than 50 years. A special section of the report examines the role of fiscal rules—such as limits on deficits or public debt—in strengthening budget discipline. More than half of developing economies now operate at least one such rule.
M. Ayhan Kose said restoring fiscal credibility has become increasingly urgent. While fiscal rules can support debt stabilisation and economic resilience, the report stresses that their effectiveness depends on institutional strength, enforcement and political commitment.
