First the good news: global growth is estimated to have stabilized at 2.7 percent in 2024 and is forecast to hold steady at that pace over 2025–26, according to the Global Economic Prospects Report.
The not-so-good news, however, is that the pace of growth appears insufficient to offset the damage done to the global economy by several years of successive negative shocks, with particularly detrimental outcomes in the most vulnerable economies. From a longer-term perspective, catch-up toward advanced-economy income levels has steadily weakened across emerging market and developing economies (EMDEs) over the first quarter of the twenty-first century. Progress in reducing extreme poverty has also slowed markedly. Heightened policy uncertainty and adverse trade policy shifts represent key downside risks to the outlook.
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The global economy appears to be settling at a steady, albeit relatively subdued, rate of growth. Over 2025–26, decelerating growth in the United States and China is expected to be offset by firming growth elsewhere, including in many EMDEs. Overall, the global economy is projected to expand at a slower pace compared to the pre-pandemic decade.
Growth remains broadly insufficient to foster sustained economic development and catch-up in per capita incomes. EMDE per capita income growth is projected to remain subdued over 2025-26, at about 3.1 percent, a notably weaker pace compared to the 2000-19 average. Excluding China and India—the main sources of EMDE income catch-up this century—progress in closing the per capita income gap with advanced economies has stalled since the early 2010s. Near-term prospects are still too meager for the most vulnerable economies, with per capita income in low-income countries (LICs) set to outright fall behind that of advanced economies over 2021-26.
Trade growth is set to firm over 2025-26 but remain below its 2010-19 average in nearly two-thirds of economies. Heightened policy uncertainty and adverse trade policy shifts are key risks to global trade and economic activity. Recourse to trade restrictions remains prevalent, with the number of new measures implemented in 2024 five times higher than the 2010-19 average.
Although progress on disinflation has been uneven across economies, inflation is now close to targets in many advanced economies and EMDEs. The share of economies with above-target inflation is on track to reach the lowest level since the peak in 2022. Monetary policy rates are generally anticipated to ease further over the forecast horizon, supporting growth. Nonetheless, advanced-economy policy rates are expected to remain well above the unusually low levels that prevailed through most of the 2010s.
Risks to the outlook remain tilted to the downside. Heightened policy uncertainty—including that related to trade, fiscal, monetary, and regulatory policies—and adverse trade policy shifts may weigh on sentiment and dampen global and EMDE growth. Other key downside risks include heightened geopolitical tensions and conflict escalations that could disrupt global trade and commodity markets, hurting growth.
Seizing Opportunities Amid Challenges
Although several global economic challenges loom in the near term, some challenges can be turned into opportunities with appropriate policy interventions. Proactive measures to address the adverse consequences of policy uncertainty, trade disruptions, and geopolitical tensions will be crucial in building a more resilient global economy that can withstand future shocks.
