Global Economy Shows Resilience but Risks Remain, UN Warns

ashen@newsofbahrain.com

The global economy is expected to grow by 2.7 per cent in 2026, slightly lower than 2.8 per cent in 2025 and well below the pre-pandemic average of 3.2 per cent, according to a new report released by the United Nations.

The World Economic Situation and Prospects 2026 report says the global economy held up better than expected in 2025, despite higher U.S. tariffs. Strong consumer spending and easing inflation helped support growth. However, weak investment, high debt levels and limited government spending capacity continue to weigh on long-term prospects.

The UN warns that trade tensions and economic uncertainty are likely to have a bigger impact in 2026. While financial conditions have improved due to lower interest rates, risks remain high, especially in sectors linked to rapid advances in artificial intelligence. Many developing countries are under pressure from high borrowing costs and heavy debt.

António Guterres, UN Secretary-General, said economic, geopolitical and technological tensions are reshaping the global economy, creating new uncertainties and social challenges. He added that many developing countries are still struggling, putting progress towards the Sustainable Development Goals at risk.

Uneven growth across regions

The report shows mixed economic performance across regions:

• United States: Growth is projected at 2.0 per cent in 2026, slightly up from 2025, supported by easier monetary and fiscal policies, though a weaker labour market may slow momentum.

• European Union: Growth is expected to slow to 1.3 per cent due to higher U.S. tariffs and geopolitical uncertainty affecting exports.

• Japan: The economy is forecast to grow by 0.9 per cent, down from 2025, as weaker global demand offsets domestic recovery.

• China: Growth is projected at 4.6 per cent, supported by targeted government measures.

• India: The economy is expected to expand by 6.6 per cent, driven by strong consumption and public investment.

• Africa: Growth may edge up to 4.0 per cent, but high debt and climate-related shocks pose risks.

• Western Asia: Growth is forecast at 4.1 per cent, though geopolitical tensions remain a concern.

• Latin America and the Caribbean: Output is expected to grow by 2.3 per cent, supported by moderate consumer demand.

Trade slows, investment remains weak

Global trade grew by 3.8 per cent in 2025, helped by early shipments and strong services trade. However, trade growth is expected to slow to 2.2 per cent in 2026 as policy uncertainty and tariffs continue.

Investment remains weak in many regions due to geopolitical tensions and tight government budgets. While artificial intelligence has boosted investment in some large economies, the report warns that the benefits may not be shared evenly, increasing inequality.

Inflation easing but cost pressures remain

Global inflation continues to slow, falling from 4.0 per cent in 2024 to 3.4 per cent in 2025, and is expected to reach 3.1 per cent in 2026. Despite this, high prices are still affecting household incomes, especially for vulnerable groups.

Li Junhua, UN Under-Secretary-General for Economic and Social Affairs, said that lower inflation must translate into real improvements for households. He stressed the need to protect essential spending and address the root causes of recurring price shocks.

Call for stronger global cooperation

The UN report calls for renewed international cooperation to manage trade shifts, inflation pressures and climate risks. It highlights the importance of rebuilding trust and strengthening a rules-based global trading system.

The report also points to the Sevilla Commitment, agreed at the Fourth International Conference on Financing for Development, as a key roadmap for reforming global finance, improving debt solutions and expanding climate and development funding to support a more stable and fair global economy.