Global growth is expected to hold steady at 2.7% in 2025-26, although the World Bank says it appears to be settling at a low growth rate that will be insufficient to foster sustained economic development.
In its latest economic outlook, the World Bank feels there is a possibility of further headwinds from heightened policy uncertainty and adverse trade policy shifts, geopolitical tensions, persistent inflation, and climate-related natural disasters.
Against this backdrop, emerging market and developing economies (EMDEs) — which fuel 60% of global growth — are set to enter the second quarter of the 21st century with per capita incomes on a trajectory that implies substantially slower catch-up toward advanced-economy living standards than they previously experienced.
Without course corrections, most low-income countries are unlikely to graduate to middle-income status by the middle of the century, the World Bank noted.
Policy action at both global and national levels is needed to foster a more favourable external environment, enhance macroeconomic stability, reduce structural constraints, address the effects of climate change, and thus accelerate long-term growth and development.
Global growth is stabilising as inflation returns closer to targets and monetary easing supports activity in both advanced economies and emerging market and developing economies.
This should give rise to a broad-based, moderate global expansion over 2025-26, at 2.7% per year, as trade and investment firm. However, growth prospects appear insufficient to offset the damage done to the global economy by several years of successive negative shocks, with particularly detrimental outcomes in the most vulnerable countries.
From a longer-term perspective, catch-up toward advanced economy income levels has steadily weakened across EMDEs over the first quarter of the 21st century, the World Bank opined.
Heightened policy uncertainty and adverse trade policy shifts represent key downside risks to the outlook.
Other risks include escalating conflicts and geopolitical tensions, higher inflation, more extreme weather events related to climate change and weaker growth in major economies.
On the upside, faster progress on disinflation and stronger demand in key economies could result in greater-than-expected global activity.
The subdued growth outlook and multiple headwinds underscore the need for decisive policy action.
Global policy efforts are required to safeguard trade, address debt vulnerabilities, and combat climate change.
National policy makers need to resolutely pursue price stability, as well as boost tax revenues and rationalise expenditures in order to achieve fiscal sustainability and finance needed investments.
Moreover, to raise longer-term growth and put development goals on track, interventions that mitigate the impact of conflicts, lift human capital, bolster labour force inclusion, and confront food insecurity will be critical.
Against a backdrop of heightened trade restrictive measures and subdued global growth, EMDE regions face varying growth prospects this year. Growth is projected to moderate in East Asia and Pacific, amid weak domestic demand in China, as well as in Europe and Central Asia due to decelerations in some large economies following strong growth last year.
In contrast, a pickup is anticipated in Latin America and the Caribbean, the Middle East and North Africa, South Asia, and Sub-Saharan Africa, partly underpinned by robust domestic demand.
In 2026, growth is expected to strengthen in most regions, the World Bank noted.
