World Bank Lowers Global Growth Outlook

Global economic growth is expected to remain weak but steady over the next two years, even as trade tensions and policy uncertainty continue. The World Bank’s latest Global Economic Prospects report says the world economy is proving more resilient than expected, but the 2020s may still become the weakest decade for global growth since the 1960s. The report also warns that income gaps, debt pressures and job-creation challenges are deepening in many developing economies.

Global Growth Outlook

Global growth is projected to ease to 2.6% in 2026 and rise slightly to 2.7% in 2027. This is an upward revision from the previous forecast, mainly due to stronger-than-expected performance in the United States. Recently, growth was supported by a temporary surge in trade before policy changes and by rapid supply-chain adjustments. These factors are expected to fade in 2026 as trade and domestic demand soften.

Advanced and Developing Economies

By the end of 2025, nearly all advanced economies are expected to have per capita incomes above 2019 levels. In contrast, about one in four developing economies is likely to remain below that benchmark. Developing economy growth is projected to slow to 4% in 2026 from 4.2% in 2025, before inching up to 4.1% in 2027. Low-income countries are expected to grow faster, at an average of 5.6% during 2026–27.

Inflation, Debt and Jobs

Global inflation is projected to fall to 2.6% in 2026, helped by softer labour markets and lower energy prices. However, developing economies face a major employment challenge, with 1.2 billion young people set to enter working age over the next decade. The report says job creation will depend on stronger capital formation, a better business environment and greater private investment.

Fiscal Rules and Policy Priorities

The report marks fiscal rules as a tool to improve debt management and restore credibility. More than half of developing economies now have at least one fiscal rule. These rules are linked to stronger growth, higher private investment and more stable financial sectors. The World Bank says credibility, enforcement and political commitment are essential for fiscal rules to work effectively.