UN Forecasts Subdued Global Growth of 2.7% in 2026 Amid Trade Tensions, Debt Risks

ERBIL (Kurdistan24) — The global economy is poised to expand at a rate of 2.7 percent in 2026, a pace that demonstrates resilience in the face of shifting trade policies but remains well below pre-pandemic standards, according to a landmark report published by the United Nations on Thursday.

The World Economic Situation and Prospects 2026 report indicates that while the global economy has withstood recent turbulence, including a sharp increase in United States tariffs, growth continues to lag behind the 3.2 percent average recorded prior to the pandemic.

The UN projects that global economic output will grow by 2.7 percent this year, a slight decrease from the 2.8 percent estimated for 2025.

The report highlights that while the absence of a broader escalation in trade frictions helped limit immediate disruptions to international commerce, the underlying risks remain substantial.

Subdued investment and limited fiscal space are weighing heavily on economic activity, raising the possibility that the global economy could settle into a trajectory of persistently slower growth than was observed in the pre-pandemic era.

Trade Frictions and Economic Resilience

The UN analysis noted that unexpected resilience to tariff shocks, bolstered by solid consumer spending and easing inflation, played a crucial role in sustaining growth over the past year. However, the impact of higher tariffs, combined with elevated macroeconomic uncertainties, is expected to become more evident throughout 2026.

While financial conditions have eased amidst monetary loosening and improved consumer sentiment, the report warns that risks remain high. Specifically, the UN pointed to elevated asset valuations, particularly in sectors linked to rapid advances in artificial intelligence (AI).

While AI has fueled pockets of strong capital spending in a few large markets, the report cautions that potential gains are likely to be unevenly distributed, risking a widening of existing structural inequalities.

Vulnerabilities in Developing Economies

A significant portion of the report addresses the financial constraints facing developing nations. High debt levels and borrowing costs are severely constraining policy space for many economies.

"A combination of economic, geopolitical and technological tensions is reshaping the global landscape, generating new economic uncertainty and social vulnerabilities," said UN Secretary-General António Guterres.

Guterres warned that many developing economies continue to struggle under these pressures, a situation that is placing progress toward achieving the Sustainable Development Goals (SDGs) at risk. 

The report emphasizes that landlocked countries and small island developing states remain particularly constrained by debt burdens and exposure to external shocks.

Regional Economic Outlooks

The report provides a detailed breakdown of projected growth across key regions, revealing an uneven landscape. In the United States, economic growth is projected at 2.0 percent in 2026, a slight increase from 1.9 percent in 2025.

This expansion is supported by monetary and fiscal easing, although the UN notes that a softening labor market will likely influence momentum.

In contrast, the European Union faces a slowdown, with growth forecast at 1.3 percent, down from 1.5 percent in 2025. The report attributes this deceleration to higher U.S. tariffs and ongoing geopolitical uncertainty, which are expected to dampen exports.

East Asia is also projected to see a moderation in growth to 4.4 percent, down from 4.9 percent the previous year, as the boost from front-loaded exports fades. China, the region’s largest economy, is expected to grow by 4.6 percent, slightly lower than in 2025, supported by targeted policy measures.

South Asia remains a bright spot, with growth forecast at 5.6 percent in 2026, though this is an easing from 5.9 percent in 2025. This regional performance is led by India, which is projected to expand by 6.6 percent driven by resilient consumption and substantial public investment.

In Africa, output is projected to grow by 4.0 percent, a slight uptick from 3.9 percent in 2025. However, the UN warns that high debt and climate-related shocks pose significant risks to this outlook.

Latin America and the Caribbean are expected to expand by 2.3 percent, slightly down from 2.4 percent in 2025, amid moderate growth in consumer demand.

Trade Slowdown and Inflationary Pressures

International trade proved resilient in 2025, expanding by a faster-than-expected 3.8 percent despite rising tariffs and policy uncertainty.

This was driven largely by the front-loading of shipments early in the year. However, momentum is expected to ease significantly, with trade growth projected to slow to 2.2 percent in 2026.

Regarding prices, the report underscores that high costs remain a key global challenge even as headline inflation declines. Headline inflation fell from 4.0 percent in 2024 to an estimated 3.4 percent in 2025 and is projected to slow further to 3.1 percent this year.

"Even as inflation recedes, high and still rising prices continue to erode the purchasing power of the most vulnerable," said Junhua Li, UN Under-Secretary-General for Economic and Social Affairs.

Li emphasized that ensuring lower inflation translates into real improvements for households requires safeguarding essential spending and tackling the structural drivers of recurring price shocks.

The report concludes by calling for deeper global coordination, pointing to the Sevilla Commitment—the outcome of the Fourth International Conference on Financing for Development held in Spain—as a blueprint for strengthening multilateral cooperation and reforming the international financial architecture.