THEBUSINESSBYTES
BUREAU
WASHINGTON,
JANUARY 13, 2026
Defying
prolonged trade tensions and lingering policy uncertainty, the global economy
is proving more resilient than earlier feared, though growth is expected to
moderate in the coming years, according to the World Bank’s latest Global
Economic Prospects report released on Tuesday.
The
multilateral lender said global growth is projected to ease to 2.6 per cent in
2026 before inching up to 2.7 per cent in 2027, marking an upward revision from
previous estimates. The improved outlook is largely driven by
stronger-than-expected momentum in the United States, which accounts for nearly
two-thirds of the forecast upgrade for 2026.
Despite this
resilience, the World Bank struck a cautionary note, warning that if current
trends persist, the 2020s could emerge as the weakest decade for global growth
since the 1960s. The slowdown is already deepening income disparities, with
most advanced economies surpassing pre-pandemic income levels while about one
in four developing economies remains poorer than in 2019.
Growth in 2025
benefited from front-loading of trade ahead of policy shifts, rapid
supply-chain realignments and easing financial conditions. However, these
temporary supports are expected to fade in 2026 as global trade and domestic
demand lose momentum. Inflation, meanwhile, is projected to decline to 2.6 per
cent in 2026 on the back of softer labour markets and lower energy prices,
creating space for growth to firm up again in 2027 as trade flows stabilise 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. He cautioned that the
combination of slower growth and record public and private debt could strain
public finances and disrupt credit markets.
Gill urged
governments to liberalise private investment and trade, curb unproductive
public consumption, and scale up investments in technology and education to avert
stagnation and rising joblessness.
The report
said growth in developing economies is expected to slow to 4 per cent in 2026
before improving to 4.1 per cent in 2027, supported by easing trade frictions,
stabilising commodity prices and better financial conditions. Low-income
countries are projected to grow at an average of 5.6 per cent over 2026–27,
though this pace will still fall short of closing income gaps with advanced
economies.
Highlighting
an emerging jobs challenge, the World Bank noted that around 1.2 billion young
people in developing economies will enter the workforce over the next decade.
Meeting this challenge, it said, will require coordinated reforms to boost
productivity, improve business climates and mobilise private capital.
The report
also flagged mounting fiscal stress across many developing nations. “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,
warning that rising debt-servicing costs are eroding fiscal sustainability.
