World Bank global growth outlook improves for 2026–27, but the bank warns the 2020s will be the weakest growth decade since the 1960s

The World Bank on Tuesday said the global economy is showing greater resilience than previously expected, even as it warned that the 2020s are on track to become the weakest decade for growth since the 1960s.

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In its latest Global Economic Prospects report, the bank projected that global growth will ease to 2.6 per cent in 2026 before rising slightly to 2.7 per cent in 2027, marking an upward revision from its June 2025 forecast.

The improved outlook reflects stronger-than-anticipated performance in several economies, particularly the United States, which accounts for about two-thirds of the upward revision to the 2026 projection, the report said.

Despite the revision, the bank cautioned that the slow pace of expansion is widening gaps in living standards.

Nearly all advanced economies had per capita incomes above 2019 levels by the end of 2025, while about one in four developing economies remained below those levels.

Growth in 2025 was supported by a surge in trade ahead of policy changes and rapid shifts in global supply chains, but these factors are expected to fade in 2026 as trade and domestic demand soften.

The bank said easing financial conditions and fiscal expansion in several large economies should help cushion the slowdown.

Global inflation is projected to fall to 2.6 per cent in 2026, driven by softer labour markets and lower energy prices, while growth is expected to strengthen modestly in 2027.

Indermit Gill, the World Bank Group’s Chief Economist and Senior Vice-President for Development Economics, said the world economy is becoming less capable of generating strong growth with each passing year.

“Economic dynamism and resilience cannot diverge indefinitely without straining public finance and credit markets,” Gill said, noting that global growth is slower than in the 1990s while public and private debt is at record levels.

Gill urged governments in both advanced and emerging economies to liberalise private investment and trade, rein in public consumption and invest in technology and education to avoid stagnation and rising unemployment.

The report projects that growth in developing economies will slow to 4.0 per cent in 2026 from 4.2 per cent in 2025, before edging up to 4.1 per cent in 2027 as trade tensions ease and financial conditions improve.

Growth in low-income countries is expected to average 5.6 per cent in 2026 and 2027, supported by stronger domestic demand, recovering exports and moderating inflation, but not enough to close income gaps with advanced economies.

Per capita income growth in developing economies is projected at 3.0 per cent in 2026, about one percentage point below its 2000–2019 average, leaving incomes at only about 12 per cent of levels in advanced economies.

The report warned that this could intensify job-creation pressures, with about 1.2 billion young people in developing economies expected to reach working age over the next decade.

The bank also stressed the need to strengthen fiscal sustainability, noting that more than half of developing economies now operate at least one fiscal rule to limit deficits, debt or spending.

Ayhan Kose, the bank’s Deputy Chief Economist and Director of the Prospects Group, said restoring fiscal credibility has become an urgent priority as public debt in emerging and developing economies is at its highest level in more than 50 years.

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“Well-designed fiscal rules can help stabilise debt and rebuild policy buffers,” Kose said, adding that credibility, enforcement and political commitment would determine whether they deliver lasting stability and growth.