The global economy is showing greater resilience than expected despite persistent trade tensions and policy uncertainty, but remains on course for its weakest growth decade in more than half a century, according to the World Bank’s latest Global Economic Prospects report.
Global growth is projected to hold broadly steady over the next two years, easing to 2.6% in 2026 before ticking up to 2.7% in 2027 both figures revised higher from the Bank’s June forecast. The upgrade reflects stronger-than-anticipated performance in major economies, led by the United States, which accounts for nearly two-thirds of the upward revision to the 2026 outlook.
Even so, the World Bank warns that the 2020s are shaping up to be the slowest decade for global growth since the 1960s, with far-reaching consequences for living standards and inequality. By the end of 2025, almost all advanced economies had regained per capita income levels above those seen in 2019, while roughly one in four developing economies remained poorer than before the pandemic.
Growth in 2025 was supported by a temporary surge in global trade ahead of anticipated policy changes, alongside rapid adjustments in supply chains. Those tailwinds are expected to fade in 2026 as trade momentum weakens and domestic demand softens. The slowdown, however, is likely to be cushioned by easing global financial conditions and fiscal expansion in several large economies.
Global inflation is projected to moderate to 2.6% in 2026, driven by softer labor markets and lower energy prices. Growth is expected to strengthen modestly in 2027 as trade flows recalibrate and policy uncertainty recedes.
“With each passing year, the global economy has become less capable of generating growth and seemingly more resilient to policy uncertainty,” said Indermit Gill, the World Bank Group’s Chief Economist and Senior Vice President for Development Economics. “But economic dynamism and resilience cannot diverge for long without fracturing public finance and credit markets.”
Gill warned that the world economy is set to grow more slowly than it did in the turbulent 1990s while carrying record levels of public and private debt, raising the risk of stagnation and joblessness. He urged governments to liberalize private investment and trade, rein in public consumption, and increase investment in technology and education.
Developing economies are forecast to see growth slow to 4% in 2026 from 4.2% in 2025, before edging up to 4.1% in 2027 as trade tensions ease, commodity prices stabilize and investment flows recover. Low-income countries are expected to outperform, with average growth of 5.6% over 2026–27, supported by firmer domestic demand, recovering exports and easing inflation.
Despite this, income gaps are set to persist. Per capita income growth in developing economies is projected at 3% in 2026—around one percentage point below its 2000–2019 average. At that pace, per capita incomes in developing economies would reach just 12% of advanced economy levels.
The outlook heightens pressure on job creation, particularly in developing countries, where an estimated 1.2 billion young people will enter the workforce over the next decade. The World Bank says meeting this challenge will require a coordinated strategy focused on boosting productivity through investment in physical, digital and human capital; improving policy credibility and regulatory certainty; and mobilizing private capital at scale.
Fiscal sustainability is another growing concern, eroded by successive global shocks, rising development needs and higher debt-servicing costs. A special chapter of the report highlights the role of fiscal rules—such as limits on deficits, debt or spending in strengthening public finances.
“With public debt in emerging and developing economies at its highest level in more than half a century, restoring fiscal credibility has become an urgent priority,” said M. Ayhan Kose, the World Bank Group’s Deputy Chief Economist.
More than half of developing economies now operate at least one fiscal rule. Those that do typically see their budget balances improve by about 1.4 percentage points of GDP within five years, the report finds. But the World Bank cautions that the effectiveness of such rules depends heavily on institutional strength, credible enforcement and political commitment.
