Global economy shows resilience, but protectionism and fiscal pressures pose risks, UN warns

The global economy is projected to grow 2.7 per cent in 2026 , slightly below last year’s 2.8 per cent and well under the pre-pandemic average of 3.2 per cent, according to the United Nations ’ World Economic Situation and Prospects 2026 report released on Thursday. While the world economy displayed unexpected resilience in 2025, underlying structural weaknesses remain a concern. Subdued investment, limited fiscal space, and high debt levels are constraining growth, raising the prospect that post-pandemic expansion may settle into a slower trajectory than in earlier decades.

The report emphasizes that rising protectionism and trade restrictions, particularly the sharp increase in US tariffs , created significant uncertainty for international commerce in 2025. Sanctions and tariff policies disrupted supply chains and exports, while investor confidence was weighed down by geopolitical tensions. Yet, economies withstood these pressures thanks to strong consumer spending and easing inflation in key markets. Early shipments ahead of tariffs and sustained demand in services helped limit the full impact of these measures, allowing growth to remain positive despite the global headwinds.

Antonio Guterres , United Nations Secretary-General, said, “Economic, geopolitical, and technological tensions are reshaping the global landscape, creating new uncertainties and social vulnerabilities.” He highlighted that many developing economies continue to struggle, making progress toward the Sustainable Development Goals slower than anticipated.

The regional outlook shows mixed trends. The United States is expected to grow 2.0 per cent in 2026, slightly up from 1.9 per cent, supported by monetary and fiscal easing, though a softening labor market could weigh on momentum. In the European Union, growth is projected at 1.3 per cent as exports face headwinds from US tariffs and ongoing geopolitical uncertainty. Japan ’s economy is likely to expand 0.9 per cent, with domestic recovery only partially offsetting weaker external demand. China is projected to grow 4.6 per cent, while East Asia overall may expand 4.4 per cent as the boost from front-loaded exports fades. South Asia is expected to grow 5.6 per cent, led by India ’s 6.6 per cent expansion, driven by resilient consumption and substantial public investment. Growth in Africa, Western Asia, and Latin America remains moderate, with debt, climate shocks, and geopolitical tensions posing continued risks.

Global trade proved surprisingly resilient in 2025, expanding 3.8 per cent despite elevated policy uncertainty and tariff pressures, though momentum is expected to slow to 2.2 per cent in 2026. Investment growth remains uneven, constrained by fiscal limitations and geopolitical tensions, while rapid advances in artificial intelligence have fueled selective capital spending, with potential benefits expected to be unevenly distributed. Headline inflation moderated from 4.0 per cent in 2024 to 3.4 per cent in 2025, and is projected to slow further to 3.1 per cent in 2026. Nevertheless, high prices continue to erode real incomes. “Even as inflation recedes, rising prices continue to affect the most vulnerable,” said Li Junhua , UN Under-Secretary-General for Economic and Social Affairs, emphasizing the need to protect essential spending and strengthen market competition.

The report underscores that while protectionist measures and sanctions create uncertainties, strong consumer demand and policy support helped economies weather shocks in 2025. Yet, with ongoing geopolitical tensions, technological shifts, and fiscal constraints, the path to sustained and inclusive growth remains fragile and uneven.