“World Bank: Global Economy Shows Resilience Amid Trade Turmoil, But Growth to Slow”
Growth Forecasts Revised Upward Despite Weakest Decade Since 1960s; Developing Economies Face Widening Income Gaps and Jobs Challenge
India, Jan 14 : The global economy is proving more resilient than expected despite historic trade tensions and policy uncertainties, according to the World Bank’s latest Global Economic Prospects report. However, growth is projected to ease in 2026 before stabilising in 2027.
The report forecasts global growth of 2.6% in 2026, edging up to 2.7% in 2027, marking an upward revision from previous projections. The stronger than anticipated performance is largely driven by better than expected growth in the United States, which accounts for about two thirds of the 2026 revision.
Despite this resilience, the World Bank cautioned that the 2020s are on track to become the weakest decade for global growth since the 1960s, widening income gaps. While nearly all advanced economies have surpassed pre-pandemic income levels, roughly one in four developing economies remains poorer than in 2019.
Factors Supporting Growth and Risks Ahead
Growth in 2025 benefited from front-loaded trade ahead of policy changes, rapid supply chain adjustments, and easing financial conditions. These factors are expected to fade in 2026 as trade and domestic demand soften. Global inflation is forecast to decline to 2.6% in 2026 due to softer labour markets and lower energy prices, with growth expected to pick up in 2027 as trade flows stabilise and policy uncertainty diminishes.
World Bank Chief Economist Indermit Gill warned that slower growth, combined with record public and private debt, risks “fracturing public finance and credit markets.” He urged governments to liberalise private investment and trade, rein in public consumption, and invest in technology and education to prevent stagnation and joblessness.
Developing Economies and Jobs Challenge
Growth in developing economies is projected to slow to 4% in 2026, rising to 4.1% in 2027, supported by easing trade tensions, stabilising commodity prices, and improved financial conditions. Low income countries are expected to grow at 5.6% on average over 2026-27, though this will not suffice to narrow income gaps with advanced economies.
The report also highlighted a growing jobs challenge, with 1.2 billion young people in developing economies entering the workforce over the next decade. Coordinated reforms to boost productivity, improve business environments, and mobilise private capital will be crucial.
Fiscal Sustainability Concerns
The World Bank flagged rising debt-servicing costs as a key concern, noting that public debt in emerging and developing economies is at its highest level in over 50 years. Deputy Chief Economist M. Ayhan Kose emphasised that restoring fiscal credibility is now an urgent priority for these nations.
