Global growth to slow to 2.7% in 2026: UN report

The global economy is expected to lose momentum in 2026, with world output projected to expand by 2.7 per cent, slightly below the estimated 2.8 per cent in 2025 and well under the pre-pandemic average of 3.2 per cent, according to the United Nations’ World Economic Situation and Prospects 2026 report.

The report highlights that a sharp increase in US tariffs has created new trade frictions, although the absence of wider escalation has helped limit immediate disruptions to international commerce. Consumer spending resilience and easing inflation have softened the initial impact of the tariff shock, but the UN cautions that underlying weaknesses remain.

Subdued investment, tight fiscal space and elevated macroeconomic uncertainty are weighing on activity across many regions. As a result, the world economy risks settling into a structurally slower growth path than before the pandemic.

Financial conditions have eased amid monetary loosening and improving consumer sentiment, yet risks remain elevated. High asset valuations, particularly in sectors linked to rapid advances in artificial intelligence, could pose financial stability concerns if market conditions shift abruptly.

“A combination of economic, geopolitical and technological tensions is reshaping the global landscape, generating new economic uncertainty and social vulnerabilities,” said UN secretary-general Antonio Guterres. 

Economic performance is expected to diverge sharply across regions. Growth in the US is forecast at 2 per cent in 2026, up slightly from 1.9 per cent in 2025, supported by monetary and fiscal easing, although a softening labour market may dampen momentum.

In the European Union, growth is projected to slow to 1.3 per cent from 1.5 per cent in 2025, as higher US tariffs and persistent geopolitical uncertainty weigh on exports and investment.

East Asia is expected to see growth ease to 4.4 per cent from 4.9 per cent, reflecting the fading boost from front-loaded exports. China’s economy is projected to expand by 4.6 per cent, marginally lower than in 2025, supported by targeted policy measures.

South Asia remains one of the fastest-growing regions, with output forecast to rise by 5.6 per cent in 2026, led by India’s 6.6 per cent expansion, driven by resilient consumption and strong public investment. In Africa, growth is projected to edge up to 4 per cent, though high debt levels and climate-related shocks pose significant risks. Latin America and the Caribbean are expected to grow by 2.3 per cent, slightly below 2025 levels.

Global trade proved more resilient than expected in 2025, expanding by 3.8 per cent as firms front-loaded shipments and services trade remained strong. However, trade growth is projected to slow to 2.2 per cent in 2026 as temporary drivers fade and policy uncertainty persists.

Headline global inflation is projected to ease further to 3.1 per cent in 2026 from 3.4 per cent in 2025. Despite disinflation, high prices continue to erode purchasing power, particularly for low-income households.

“Even as inflation recedes, high and still rising prices continue to erode the purchasing power of the most vulnerable. Ensuring that lower inflation translates into real improvements for households requires safeguarding essential spending, strengthening market competition, and tackling the structural drivers of recurring price shocks,” said Junhua Li, UN under-secretary-general for economic and social affairs.

The report calls for deeper international coordination to address trade realignments, persistent price pressures and climate-related shocks. It stresses that many developing economies, landlocked countries and small island states remain constrained by heavy debt burdens and limited policy space, underscoring the need for stronger multilateral cooperation and expanded development finance to support resilient and sustainable growth.

ALCHEMPro News Desk (HU)