World Economic Situation and Prospects 2026 update from United Nations stated that global growth is slowing and remains uneven across regions. World output is projected to slow to 2.7% in 2026 before edging up to 2.9% in 2027, still below the pre-pandemic average of 3.2%. While domestic demand and policy easing are supporting activity in the United States and parts of Asia, growth remains weak in Europe, and high debt and climate shocks continue to constrain many developing economies. Trade and investment face mounting headwinds. Global trade performed better than expected in 2025, driven by early shipments ahead of higher tariffs and robust services exports. But growth is projected to slow in 2026, as temporary drivers fade and trade barriers and policy uncertainty persist. Investment remains subdued in most regions.

Global inflation is easing, but the cost-of-living squeeze persists. The headline inflation is projected to fall to 3.1% in 2026 from 3.4% in 2025. However, high prices continue to erode real incomes, particularly for low-income households, with food, energy and housing costs remaining a major source of pressure and inequality. It noted further that financial conditions have eased, but risks remain elevated. Lower interest rates and improved market sentiment have helped revive capital flows, but high asset valuations – particularly in AI-related sectors – and still-elevated borrowing costs continue to pose risks. Many developing economies remain constrained by heavy debt burdens and limited access to affordable finance.

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