NewsGlobalGlobal Economy Shows Resilience Despite Trade Tensions, But Developing World Lags Behind: World BankGlobal Economy Shows Resilience Despite Trade Tensions, But Developing World Lags Behind: World Bank
The World Bank's Global Economic Prospects report shows the global economy demonstrating unexpected resilience with upward-revised growth projections of 2.6% in 2026 and 2.7% in 2027, largely driven by US performance. However, recovery remains uneven as one in four developing economies still have lower per capita incomes than pre-pandemic levels. The report warns the 2020s could be the weakest growth decade since the 1960s, while developing nations face record debt levels and a looming jobs crisis with 1.2 billion youth entering the workforce over the next decade.
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The global economy is demonstrating greater resilience than anticipated despite facing historic levels of trade disruption and policy uncertainty, according to the World Bank's latest Global Economic Prospects report. However, this recovery remains markedly uneven, with a significant portion of developing economies still struggling to regain pre-pandemic economic levels.
Growth Projections and Regional Disparities
The World Bank has revised its global growth projections upward, forecasting economic expansion of 2.6% in 2026 and 2.7% in 2027. This represents an improvement from the institution's June forecast, with the United States accounting for nearly two-thirds of the upward revision for 2026.
| Economic Indicator | 2025 | 2026 | 2027 |
|---|---|---|---|
| Global Growth | - | 2.6% | 2.7% |
| Developing Economies Growth | 4.2% | 4.0% | 4.1% |
| Low-Income Countries Growth | - | 5.6% (avg 2026-27) | 5.6% (avg 2026-27) |
| Global Inflation | - | 2.6% | - |
Despite these projections, the report cautions that if current trends continue, the 2020s will emerge as the weakest decade for global growth since the 1960s. The sluggish growth is creating widening income disparities between nations, with almost all advanced economies achieving per capita incomes above 2019 levels by the end of 2025, while approximately one in four developing economies remained poorer than before the pandemic.
Temporary Growth Drivers and Future Challenges
Growth in 2025 received support from a pre-emptive surge in trade ahead of anticipated policy changes and rapid adjustments in global supply chains. However, these temporary tailwinds are expected to fade in 2026 as trade momentum and domestic demand soften. The World Bank anticipates that easing global financial conditions and fiscal expansion in several large economies will help cushion the anticipated slowdown.
Global inflation is projected to moderate to 2.6% in 2026, reflecting softer labour markets and lower energy prices. Growth is expected to strengthen modestly in 2027 as trade patterns adjust and policy uncertainty diminishes.
Expert Analysis and Policy Recommendations
Indermit Gill, Chief Economist of the World Bank Group, highlighted a concerning trend: "With each passing year, the global economy has become less capable of generating growth and seemingly more resilient to policy uncertainty. But economic dynamism and resilience cannot diverge for long without fracturing public finance and credit markets."
Gill warned that the world economy is positioned to grow more slowly than during the troubled 1990s while carrying record levels of public and private debt. To avoid stagnation and unemployment, he emphasized that governments must:
- Liberalize trade and private investment
- Rein in public consumption
- Invest aggressively in education and new technologies
Developing Economies Face Mounting Pressures
Developing economies are projected to experience a deceleration in growth, slowing to 4.0% in 2026 from 4.2% in 2025, before recovering slightly to 4.1% in 2027. This improvement is expected as trade tensions ease, commodity prices stabilize, and financial conditions improve.
| Challenge Area | Key Statistics |
|---|---|
| Income Convergence | Per capita income growth: 3.0% in 2026 |
| Historical Comparison | One percentage point below 2000-2019 average |
| Income Gap | Developing economies at 12% of advanced economy levels |
| Youth Employment | 1.2 billion young people entering workforce (next decade) |
| Public Debt | Highest level in over 50 years |
The report identifies a critical jobs challenge, particularly in developing countries where an estimated 1.2 billion young people will enter the working-age population over the next decade. Addressing this challenge requires a comprehensive three-pronged policy approach: strengthening physical, digital and human capital; improving policy credibility and regulatory certainty to encourage firm expansion; and mobilizing private capital at scale to boost investment.
Fiscal Sustainability and Policy Solutions
The World Bank emphasized the urgent need to restore fiscal sustainability in developing economies, which has deteriorated due to overlapping economic shocks, rising development needs, and higher debt-servicing costs. Public debt in emerging and developing economies has reached its highest level in more than 50 years.
A special chapter of the report examines fiscal rules, such as limits on deficits, debt, or spending, which are now implemented in more than half of developing economies. Countries adopting such rules typically see budget balances improve by an average of 1.4 percentage points of GDP after five years.
M. Ayhan Kose, the World Bank's Deputy Chief Economist, stressed the importance of fiscal discipline: "With public debt at historic highs, restoring fiscal credibility has become an urgent priority. Fiscal rules can help, but their success ultimately depends on strong institutions, credible enforcement and sustained political commitment."
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