The global economy is proving more resilient than expected despite persistent trade tensions and policy uncertainty, with growth projected to remain broadly steady through 2027, according to the World Bank’s latest Global Economic Prospects report released Tuesday.
The World Bank forecasts global growth of 2.6% in 2026, before edging up to 2.7% in 2027, an upward revision from its June outlook. The improvement is driven largely by stronger-than-expected performance in the United States, which accounts for about two-thirds of the upgrade to next year’s forecast.
Still, the bank warned that if current projections hold, the 2020s will be the weakest decade for global growth since the 1960s, deepening disparities between advanced and developing economies.
“Nearly all advanced economies have recovered to pre-pandemic income levels, but about one in four developing economies remains poorer than in 2019,” the report said, pointing to widening gaps in living standards.
Growth in 2025 was supported by a surge in global trade ahead of anticipated policy changes and rapid adjustments in supply chains. Those temporary boosts are expected to fade in 2026 as trade and domestic demand soften. However, easing financial conditions and fiscal expansion in several large economies are expected to cushion the slowdown, the report said.
Global inflation is projected to ease to 2.6% in 2026, reflecting softer labor markets and lower energy prices. Growth is expected to strengthen in 2027 as trade flows adjust and policy uncertainty diminishes.
“With each passing year, the global economy has become less capable of generating growth and seemingly more resilient to policy uncertainty,” said Indermit Gill, the World Bank Group’s chief economist. “But economic dynamism and resilience cannot diverge for long without fracturing public finance and credit markets.”
Gill warned that the world economy is on track to grow more slowly than it did in the troubled 1990s while carrying record levels of public and private debt. He urged governments to boost private investment, expand trade, curb excessive public consumption and invest in education and technology.
In developing economies, growth is projected to slow to 4% in 2026, from 4.2% in 2025, before inching up to 4.1% in 2027 as trade tensions ease, commodity prices stabilize and financial conditions improve. Low-income countries are expected to grow faster, averaging 5.6% over 2026–27, supported by firmer domestic demand and recovering exports.
Even so, income gaps are expected to persist. Per capita income growth in developing economies is projected at 3% in 2026, about one percentage point below the average recorded between 2000 and 2019. At that pace, average per capita income in developing countries would remain only about 12% of that in advanced economies, the report said.
The World Bank warned that slow income growth could worsen job shortages as an estimated 1.2 billion young people in developing economies reach working age over the next decade. Addressing the employment challenge will require investment in infrastructure, digital connectivity and education, along with reforms to improve business conditions and attract private capital, the report said.
Developing economies also face growing fiscal pressure after years of overlapping shocks, rising social spending needs and higher debt-servicing costs. A special chapter of the report examined the use of fiscal rules — limits on borrowing, deficits or spending — as tools to stabilize public finances.
“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,” said M. Ayhan Kose, the World Bank’s deputy chief economist. “Well-designed fiscal rules can help governments stabilize debt, rebuild policy buffers, and respond more effectively to shocks.”
More than half of developing economies now operate under at least one fiscal rule, the report found. Countries that adopt such rules typically improve their budget balance by about 1.4 percentage points of GDP within five years, after adjusting for economic cycles and interest costs. Fiscal rules also raise the likelihood of sustained improvements in budget balances, though their long-term effectiveness depends heavily on strong institutions, political commitment and sound design.
