The global economy is set to lose further momentum in 2026, with world output projected to grow by 2.7%, down from an estimated 2.8% in 2025 and well below the pre-pandemic average of 3.2%, according to the United Nations World Economic Situation and Prospects 2026 report.
The UN notes that a sharp rise in US tariffs has introduced new trade frictions, reshaping global commerce. While the absence of broader tariff escalation has helped prevent immediate disruption, the report cautions that subdued investment, tight fiscal space and elevated macroeconomic uncertainty continue to weigh heavily on global activity, raising the risk of the world economy settling into a structurally slower growth trajectory.
Although consumer spending resilience and easing inflation have softened the initial impact of the tariff shock, underlying vulnerabilities remain. Financial conditions have improved amid monetary easing and stronger consumer sentiment, but risks persist, particularly from high asset valuations, including in sectors linked to rapid advances in artificial intelligence, which could threaten financial stability if market sentiment shifts abruptly.
UN Secretary-General Antonio Guterres warned that a combination of economic, geopolitical and technological tensions is reshaping the global landscape, generating fresh uncertainty and widening social vulnerabilities.
Diverging regional outlook
Economic performance in 2026 is expected to diverge sharply across regions. US growth is forecast at 2%, slightly higher than in 2025, supported by fiscal and monetary easing, though a softening labor market may curb momentum. In the European Union, growth is projected to slow to 1.3%, as higher US tariffs and ongoing geopolitical uncertainty dampen exports and investment.
East Asia’s growth is expected to ease to 4.4%, reflecting the fading boost from front-loaded exports, while China’s economy is projected to expand by 4.6%, supported by targeted policy measures. South Asia remains among the fastest-growing regions, with output forecast to rise by 5.6%, led by India’s 6.6% growth, driven by robust consumption and strong public investment.
In Africa, growth is expected to edge up to 4%, though high debt levels and climate-related shocks pose significant risks. Latin America and the Caribbean are projected to grow by 2.3%, slightly below 2025 levels.
Trade, inflation and policy challenges
Global trade showed unexpected resilience in 2025, expanding by 3.8%, supported by front-loaded shipments and strong services trade. However, trade growth is projected to slow to 2.2% in 2026 as temporary drivers fade and policy uncertainty persists.
Global inflation is expected to ease further to 3.1% in 2026, down from 3.4% in 2025. Despite this moderation, the UN warns that persistently high prices continue to erode purchasing power, particularly for low-income households. Junhua Li, UN Under-Secretary-General for Economic and Social Affairs, stressed that disinflation must translate into real income gains, calling for the protection of essential spending, stronger competition and action on the structural causes of recurring price shocks.
The report urges deeper international coordination to manage trade realignments, climate-related shocks and persistent price pressures. It highlights 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 global growth.
