The global economy has shown resilience amid turbulence over the past year, including shifting trade policies, but growth remains subdued and well below pre-pandemic levels, the United Nations said in a landmark report published on Thursday.
The World Economic Situation and Prospects 2026 report projects global economic growth of 2.7 per cent this year, slightly below the estimated 2.8 per cent in 2025 and significantly under the pre-pandemic average of 3.2 per cent.
In South Asia, growth is forecast at 5.6 per cent in 2026, easing from 5.9 per cent in 2025. Pakistan is expected to see growth of around 3.0–3.4 per cent, driven by easing inflation and improving confidence, although deep-rooted structural challenges persist despite recent policy efforts. India’s economy is projected to expand by 6.6 per cent, supported by resilient consumption and substantial public investment.
The report notes that a sharp increase in United States tariffs has “created new trade frictions, though the absence of broader escalation helped limit immediate disruptions to international commerce.”
Global economic growth is forecast to slow from 2.8% in 2025 to 2.7% this year.@UNDESA‘s new #WorldEconomyReport warns that while the global economy has stayed resilient, trade tensions, geopolitical risks & fiscal strains are clouding the outlook. https://t.co/lp3rNtQckV pic.twitter.com/WDaQwknXay
— United Nations (@UN) January 8, 2026
Unexpected resilience to the tariff shock—supported by solid consumer spending and easing inflation—helped sustain growth, but underlying weaknesses remain. Subdued investment and limited fiscal space continue to weigh on economic activity, raising the risk that the global economy could settle into a persistently slower growth trajectory than before the pandemic.
While a partial easing of trade tensions has helped contain disruptions to international commerce, the impact of higher tariffs and elevated macroeconomic uncertainty is expected to become more evident this year.
Financial conditions have eased amid monetary loosening and improved consumer sentiment, but risks remain high, particularly due to elevated asset valuations in sectors linked to rapid advances in artificial intelligence (AI). High debt levels and borrowing costs are also constraining policy space, especially in many developing economies.
“A combination of economic, geopolitical and technological tensions is reshaping the global landscape, generating new economic uncertainty and social vulnerabilities,” UN Secretary-General António Guterres said. He warned that “many developing economies continue to struggle,” placing progress toward achieving the Sustainable Development Goals (SDGs) at risk.
Economic growth in the United States is projected at 2.0 per cent in 2026, up from 1.9 per cent in 2025, supported by monetary and fiscal easing, although a softening labor market is expected to affect momentum.
In the European Union, growth is forecast at 1.3 per cent, down from 1.5 per cent in 2025, as higher US tariffs and ongoing geopolitical uncertainty dampen exports.
East Asia’s economy is projected to grow by 4.4 per cent, down from 4.9 per cent the previous year, as the boost from front-loaded exports fades. China, the region’s largest economy, is expected to grow by 4.6 per cent, slightly lower than in 2025, supported by targeted policy measures.
In Africa, output is forecast to expand by 4.0 per cent, a modest increase from 3.9 per cent in 2025, though high debt levels and climate-related shocks pose significant risks. In Latin America and the Caribbean, growth is expected to slow slightly to 2.3 per cent from 2.4 per cent in 2025, amid moderate consumer demand and a mild recovery in investment.
Global trade proved resilient in 2025, expanding by a faster-than-expected 3.8 per cent despite elevated policy uncertainty and rising tariffs. This growth was driven by front-loaded shipments early in the year and robust services trade. However, momentum is expected to weaken, with trade growth projected to slow to 2.2 per cent.
Investment growth remains subdued in most regions due to geopolitical tensions and tight fiscal conditions. While monetary easing and targeted fiscal measures have supported investment in some economies, rapid advances in AI have fueled pockets of strong capital spending in a few major markets. The report cautions, however, that gains from AI are likely to be unevenly distributed, potentially widening existing structural inequalities.
The report also highlights that high prices remain a key global challenge, even as disinflation continues. Headline inflation declined from 4.0 per cent in 2024 to an estimated 3.4 per cent in 2025 and is projected to slow further to 3.1 per cent 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. “Ensuring that lower inflation translates into real improvements for households requires safeguarding essential spending, strengthening market competition, and tackling the structural drivers of recurring price shocks.”
The report calls for deeper global coordination and decisive collective action in an era marked by trade realignments, persistent price pressures and climate-related shocks.
Iftikhar Ali is a veteran Pakistani journalist, former president of UN Correspondents Association, and a recipient of the Pride of Performance civil award
