The global economy is projected to grow by 2.7% in 2026, a slight decline from the 2.8% estimated for 2025 and significantly below the pre-pandemic average of 3.2%. According to the World Economic Situation and Prospects (WESP) 2026 report, released on January 8, while the world economy has shown resilience, it faces a transition into a more fragile, lower-growth era.
The report, published by the UN Department of Economic and Social Affairs (UN DESA), highlights that while declining inflation and easing monetary conditions have stabilized demand, deep-seated structural weaknesses remain.
Despite a resilient performance over the past year, the report identifies several “mounting headwinds” that threaten long-term stability:
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Growth Deceleration: The 2.7% growth rate reflects a cooling trend as the temporary boosts of 2025—such as early trade shipments ahead of tariff changes—begin to fade.
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Inflation Cooling, but Prices Remain High: Global headline inflation is projected to drop to 3.1% in 2026, down from 4.0% in 2024. However, the UN warns that high price levels continue to erode the purchasing power of low-income households.
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Trade and Investment Slump: Following a robust 2025 for services and trade, growth is expected to slow in 2026 due to persistent policy uncertainty and new trade barriers.
The report places a spotlight on the widening gap between developed and developing economies. Elevated debt levels and high borrowing costs are narrowing the “policy space” for developing nations, making it difficult for them to invest in job creation and long-term development. “Even as inflation recedes, high and still rising prices continue to erode the purchasing power of the most vulnerable,” said Li Junhua, UN Under-Secretary-General for Economic and Social Affairs. “Ensuring that lower inflation translates into real improvements for households requires safeguarding essential spending and tackling the structural drivers of price shocks.”
The WESP 2026 identifies volatile capital flows, geopolitical tensions, and rapid technological change as primary risks that could deepen global inequalities. To navigate this period of heightened uncertainty, the report calls for:
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Reducing policy unpredictability to restore business confidence.
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Strengthening investment conditions to reverse the current trend of subdued capital expenditure.
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Reinforcing international cooperation to address trade fragmentation and support debt-distressed nations.
