The global economy is proving more resilient than anticipated, despite persistent trade tensions and policy uncertainty, according to the World Bank’s latest Global Economic Prospects report.
Global growth is projected to remain broadly steady over the next two years, easing to 2.6 percent in 2026 before rising to 2.7 percent in 2027, an upward revision from the June forecast.
According to the World Bank, the resilience reflects better-than-expected growth, especially in the United States, which accounts for about two-thirds of the upward revision to the forecast in 2026.
The sluggish pace is widening the gap in living standards across the world, the report finds: at the end of 2025, nearly all advanced economies enjoyed per capita incomes exceeding their 2019 levels, but about one in four developing economies had lower per capita incomes.
The report notes that in 2025, growth was supported by a surge in trade ahead of policy changes and swift readjustments in global supply chains. These boosts are expected to fade in 2026 as trade and domestic demand soften.
However, the easing global financial conditions and fiscal expansion in several large economies should help cushion the slowdown, it says.
The report also indicates that global inflation is projected to edge down to 2.6 further in 2026, reflecting softer labour markets and lower energy prices. Growth is expected to pick up in 2027 as trade flows adjust and policy uncertainty diminishes.
The World Bank Group’s Chief Economist and Senior Vice President for Development Economics, Indermit Gill, noted in the report that with each passing year, the global economy has become less capable of generating growth and seemingly more resilient to policy uncertainty.
However, Gill said the economic dynamism and resilience cannot diverge for long without fracturing public finance and credit markets.
“Over the coming years, the world economy is set to grow slower than it did in the troubled 1990s, while carrying record levels of public and private debt. To avert stagnation and joblessness, governments in emerging and advanced economies must aggressively liberalize private investment and trade, rein in public consumption, and invest in new technologies and education,” Gill said.
The World Bank further pointed out that in 2026, growth in developing economies is expected to slow to 4 percent from 4.2 percent in 2025 before edging up to 4.1 percent in 2027 as trade tensions ease, commodity prices stabilize, financial conditions improve, and investment flows strengthen.
Growth is projected to be higher in low-income countries, reaching an average of 5.6percent over 2026–27, buoyed by firming domestic demand, recovering exports, and moderating inflation, reads the World Bank report.
However, it states that this will not be sufficient to narrow the income gap between developing and advanced economies. Per capita income growth in developing economies is projected to be three percent in 2026 about a percentage point below its 2000-2019 average.
At this pace, per capita income in developing economies is expected to be only 12 percent of the level in advanced economies, the report warns, adding that these trends could intensify the job-creation challenge confronting developing economies, where 1.2 billion young people will reach working age over the next decade.
“Overcoming the jobs challenge will require a comprehensive policy effort centered on three pillars. The first is strengthening physical, digital, and human capital to raise productivity and employability. The second is improving the business environment by enhancing policy credibility and regulatory certainty so firms can expand. The third is mobilizing private capital at scale to support investment. Together, these measures can help shift job creation toward more productive and formal employment, supporting income growth and poverty alleviation,” the reportrevealed.
The bank urges developing economies to bolster their fiscal sustainability, which has been eroded in recent years by overlapping shocks, growing development needs, and rising debt-servicing costs.
