Published in the Afreximbank’s July report, the global economy is set to slow to its weakest pace in years as high interest rates, geopolitical tensions and weakening trade dampen investment and consumer demand, according to the World Bank, which warned that the post-pandemic recovery is giving way to a period of structurally slower growth.
The report projected global output to expand by 2.5% in 2026, down from 2.9% in 2025, before edging up to 2.8% in 2027. Despite the anticipated rebound, growth is expected to remain below its long-term pre-pandemic average, underscoring persistent structural challenges facing the world economy.
The outlook is a reflection of the combined impact of restrictive monetary policies, geopolitical conflicts, elevated trade uncertainty and weakening global investment, factors that continue to constrain economic activity across both advanced and developing economies.
“The global economy is transitioning from a period of post-pandemic recovery to one of structurally slower and more uneven growth,” the report said.
The slowdown is expected to deepen economic fragmentation, with advanced economies and developing nations following increasingly divergent growth paths.
Advanced economies are forecast to grow by just 1.5% in 2026 before recovering modestly to 1.8% in 2027, as the effects of years of monetary tightening, subdued productivity growth and fiscal consolidation weigh on domestic demand.
Emerging markets and developing economies are expected to outperform their wealthier peers, although growth in those countries is projected to slow from 4.4% in 2025 to 3.6% in 2026 before rebounding to 4.2% in 2027. The report attributed the slowdown to the combined effects of restrictive monetary policies, elevated trade uncertainty, geopolitical tensions and weakening global investment
Among major economies, the United States is expected to remain relatively resilient, with growth projected at 2.2% in 2026, supported by robust consumer spending, a strong labor market and productivity gains from artificial intelligence and digital technologies.
Europe’s economy, however, is expected to lag behind. Growth in the euro area is forecast at just 0.8%, reflecting weak household spending, sluggish industrial production and the lingering effects of high energy costs. Japan is projected to expand by 0.7%, constrained by demographic pressures and subdued domestic demand.
China, the world’s second-largest economy, is projected to slow to 4.2% growth in 2026 as structural problems in the property sector, softer consumer demand and demographic headwinds continue to weigh on activity.
India is forecast to remain the world’s fastest-growing major economy, with output expected to expand by 6.6%, supported by infrastructure spending, digitalization and ongoing economic reforms.
Sub-Saharan Africa is projected to remain comparatively resilient, with growth easing slightly to 4% in 2026 before strengthening to 4.4% in 2027 as domestic demand recovers and governments implement economic reforms.
Nigeria, Africa’s largest economy, is expected to expand by 4.1% in 2026 and 4.2% in 2027, supported by exchange-rate reforms, improved macroeconomic stability and stronger investor confidence. South Africa, by contrast, is projected to grow by only 1% next year as energy shortages, infrastructure constraints and weak productivity continue to limit economic performance.
The Middle East and North Africa region is expected to experience one of the sharpest swings in economic activity. Growth is forecast to slow from 4% in 2025 to 1.6% in 2026 before rebounding to 5% in 2027, reflecting geopolitical tensions, changing oil-production levels and volatility in global energy markets.
The report also pointed to a significant slowdown in world trade. Global trade volumes are projected to increase by 2.9% in 2026, down sharply from 4.8% in 2025, before recovering slightly to 3.3% in 2027.
The weaker trade outlook reflects geopolitical fragmentation, supply-chain realignment and rising protectionist measures, developments that could hit export-dependent and commodity-producing economies particularly hard by reducing foreign-exchange earnings and investment inflows.
In contrast to wealthier nations, low-income countries are expected to accelerate, with growth forecast to rise from 5% in 2025 to 5.4% in 2026 and 5.6% in 2027, supported by infrastructure investment and favorable demographic trends.
Poorer economies remain highly vulnerable to climate shocks, food insecurity, geopolitical disruptions and elevated borrowing costs, pointing to the need for structural reforms and stronger fiscal buffers.
While technological innovation and resilience in major economies continue to support activity, high interest rates, slowing trade and geopolitical uncertainty are likely to keep global growth below historical norms for years to come.
