The global economy will expand 2.6 percent in 2026 and 2.7 percent in 2027, representing the weakest decade of growth since the 1960s despite showing unexpected resilience amid trade tensions and policy uncertainty, according to the World Bank’s latest Global Economic Prospects report released Monday.
The projections, upgraded from June forecasts, reflect stronger than expected performance in major economies, particularly the United States, which accounts for nearly two thirds of the upward revision to the 2026 forecast. However, the pace remains insufficient to close widening gaps in living standards between advanced economies and the developing world.
By the end of 2025, nearly all advanced economies had restored per capita incomes above pre pandemic levels. In contrast, more than one quarter of emerging market and developing economies (EMDEs), particularly low income and fragile states, remain below 2019 income levels. This divergence underscores the uneven nature of the recovery, with prosperity increasingly concentrated in wealthier nations.
Indermit Gill, the World Bank Group’s Chief Economist and Senior Vice President for Development Economics, said the global economy has become less capable of generating growth while seemingly more resilient to policy uncertainty. He warned that economic dynamism and resilience cannot diverge for long without fracturing public finance and credit markets.
The improved outlook reflects several factors that sustained activity in 2025. Stockpiling of traded goods ahead of anticipated policy changes, robust risk appetite in financial markets, and surging investment in artificial intelligence helped maintain momentum despite heightened trade tensions and regulatory uncertainty. The World Bank estimates global growth reached 2.7 percent in 2025, up from the 2.3 percent projected in June.
These temporary supports are expected to fade in 2026 as trade momentum weakens and household demand cools. However, easing global financial conditions and fiscal expansion in several large economies should help cushion the slowdown. Global inflation is projected to ease to 2.6 percent in 2026, providing some relief to households and businesses, reflecting softer labor markets and lower energy prices.
Growth in emerging market and developing economies is expected to slow to four percent in 2026 from 4.2 percent in 2025, before edging up to 4.1 percent in 2027 as trade tensions ease, commodity prices stabilize, financial conditions improve and investment flows strengthen. Low income countries are projected to reach average growth of 5.6 percent over 2026 and 2027, buoyed by firming domestic demand, recovering exports and moderating inflation.
However, this pace will not be sufficient to narrow the income gap between developing and advanced economies. Per capita income growth in developing economies is projected at three percent in 2026, about a percentage point below its 2000 to 2019 average. At this rate, per capita income in developing economies is expected to be only 12 percent of the level in advanced economies.
These trends could intensify the job creation challenge confronting developing economies, where 1.2 billion young people will reach working age over the next decade. Sub Saharan Africa faces particularly acute pressure, with the region needing to generate employment at unprecedented scale to absorb its rapidly expanding youth population.
Regional prospects remain mixed. Growth in Sub Saharan Africa is expected to rise to 4.3 percent in 2026 and firm to 4.5 percent in 2027, supported by strengthening investment and exports, continued easing of inflation and reform momentum in several large economies. South Asia growth is projected to fall to 6.2 percent in 2026 before recovering to 6.5 percent in 2027, mainly reflecting the impact of increased trade restrictions.
East Asia and Pacific growth is expected to slow to 4.4 percent in 2026 and 4.3 percent in 2027. In China, growth is expected to decline to 4.4 percent this year and 4.2 percent next year, owing to subdued demand amid an ongoing structural slowdown. Europe and Central Asia growth is forecast to hold steady at 2.4 percent in 2026 before strengthening to 2.7 percent in 2027.
Latin America and the Caribbean growth is projected to edge up to 2.3 percent in 2026 before firming to 2.6 percent in 2027. The Middle East, North Africa, Afghanistan and Pakistan region is expected to see growth rise to 3.6 percent in 2026 and further strengthen to 3.9 percent in 2027, mainly reflecting expanding activity in oil exporters.
The United States economy is projected to grow 2.2 percent in 2026, up from the 1.6 percent forecast in June. The World Bank estimates US growth reached 2.1 percent in 2025, far ahead of the 1.4 percent expected in the mid year forecast. The upgrade reflects stronger domestic demand and productivity gains tied to technology investment, though growth still represents a slowdown from 2024.
The report frames the outlook within the Bank’s call for a New African Financial Architecture and broader reforms to strengthen financial sovereignty in developing regions. It urges coordinated global action to restore trade stability, scale up support for vulnerable countries and bolster fiscal resilience.
Downside risks include escalating trade barriers, subdued foreign direct investment and fragile debt dynamics in developing economies. The World Bank warned that an escalation in trade restrictions, renewed financial market volatility or inflation surprises could weaken activity. On the upside, broader diffusion of artificial intelligence driven investment and continued supply chain adaptation could extend the current expansion.
World trade volume growth is projected to slow as the temporary boost from inventory stockpiling fades. Global supply chains demonstrated remarkable flexibility in 2025, allowing trade growth to reach approximately 3.4 percent. However, this rate remains below levels seen in the decade before the COVID 19 pandemic, an area where improvement is crucial for developing economies reliant on trade.
Limited fiscal space from elevated debt servicing costs and declining donor support continue to constrain development in low income countries. Interest payments are expected to fluctuate between 2.9 and 3.3 percent of GDP through 2026, diverting resources away from health, education and infrastructure. Although real per capita income growth is projected to average about 2.8 percent in 2026 and 2027, this remains insufficient to recover pandemic era losses or generate adequate job creation, leaving extreme poverty widespread.
The World Bank emphasized that realizing Africa’s demographic dividend requires urgent action. The continent needs not just more jobs but better jobs that offer sustainable incomes and opportunities for advancement. Without fundamental shifts in how economies generate employment, the region’s growth story risks becoming a cautionary tale of missed opportunities.
Policymakers are warned to remain vigilant against renewed price shocks despite the expected easing of inflation. The report serves as both a warning about current vulnerabilities and a roadmap for navigating an increasingly fragmented economic landscape. The World Bank stressed that restoring stability will require coordinated policy adjustments, including de escalating trade conflicts, strengthening multilateral cooperation frameworks and implementing structural reforms to rebuild fiscal buffers.
