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.

The report projects global growth to remain broadly stable, slowing slightly to 2.6 per cent in 2026 before inching up to 2.7 per cent in 2027. These figures represent an upward revision from the World Bank’s June forecast.

In developing economies, growth is expected to ease to 4.0 per cent in 2026 from 4.2 per cent in 2025, before recovering modestly to 4.1 per cent in 2027. The improvement is attributed to easing trade tensions, stabilising commodity prices and improving financial conditions.

Low-income countries are projected to record faster growth, averaging 5.6 per cent in 2026 and 2027, supported by strong domestic demand, recovering exports and moderating inflation. However, the report cautions that income disparities will persist. Per capita income growth in developing economies is forecast at 3.0 per cent in 2026, leaving income levels at just 12 per cent of those in advanced economies.

The World Bank noted that much of the improved global outlook reflects stronger-than-expected economic performance, particularly in the United States, which accounted for nearly two-thirds of the upward revision to the 2026 growth forecast.

Despite the relatively positive outlook, the report warned that if current projections hold, the 2020s would become the weakest decade for global growth since the 1960s.

“The slow pace of growth is widening disparities in living standards. By the end of 2025, nearly all advanced economies had per capita incomes above pre-pandemic 2019 levels, while about one in four developing economies remained below those levels,” the report said.

It explained that growth in 2025 was supported by a temporary surge in trade ahead of anticipated policy changes and rapid adjustments in global supply chains. These effects are expected to fade in 2026 as trade momentum and domestic demand weaken.

However, the report noted that easing global financial conditions and fiscal expansion in several large economies could help cushion the slowdown. Global inflation is projected to decline to 2.6 per cent in 2026, driven by softer labour markets and lower energy prices. Growth is expected to strengthen again in 2027 as trade flows adjust and policy uncertainty diminishes.

The World Bank highlighted that these trends pose a significant employment challenge, with an estimated 1.2 billion young people in developing economies expected to enter the labour force over the next decade.

To address this, the report called for a comprehensive strategy focused on strengthening physical, digital and human capital; improving the business environment through greater policy credibility and regulatory certainty; and mobilising private investment at scale. It stressed that success would depend on strong institutions, credible enforcement and sustained political commitment.

Commenting on the report, World Bank Group Chief Economist Indermit Gill said that “with each passing year, the global economy has become less capable of generating growth, yet seemingly more resilient to policy uncertainty.”

He warned that weak growth combined with record levels of public and private debt could place significant strain on public finances and global credit markets. To avoid prolonged stagnation and rising joblessness, Mr Gill urged governments to liberalise trade and private investment, restrain public consumption, and invest more heavily in technology and education.

Meanwhile, the World Bank Group’s Deputy Chief Economist and Director of the Prospects Group, M. Ayhan Kose, cautioned that 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.

“Well-designed fiscal rules can help governments stabilise debt, rebuild policy buffers and respond more effectively to shocks,” he said. “But rules alone are not enough—credibility, enforcement and political commitment ultimately determine whether fiscal rules deliver stability and growth.”