The global economy is facing a slower-growth environment as higher energy costs, geopolitical tensions, trade-policy uncertainty and tighter financial conditions continue to affect the outlook for countries and businesses.
The World Bank’s latest Global Economic Prospects, published in June 2026, projects global economic growth at 2.5% in 2026, down from 2.9% in 2025. It expects growth to recover to 2.8% in 2027.
The forecast followed major disruptions in energy and commodity markets linked to the conflict in the Middle East. The World Bank said higher energy prices were contributing to renewed inflationary pressure and increased borrowing costs.
At the same time, international trade has shown greater resilience than some earlier indicators suggested.
The World Trade Organization said in September that its latest Goods Trade Barometer remained above its trend benchmark, indicating that merchandise trade continued to strengthen in the middle of 2026 despite geopolitical and trade-policy uncertainty.
World Bank sees weaker global growth
The World Bank’s June forecast marked a significant reduction in its assessment of the global economy.
Global growth was projected to fall from 2.9% in 2025 to 2.5% in 2026, which the institution described as the lowest rate since the COVID-19 pandemic.
Growth was expected to recover to 2.8% in 2027, although the World Bank said this would remain below the average recorded during the 2010s.
The slowdown is not expected to affect every economy equally.
The World Bank projected growth in developing economies at 3.6% in 2026, down from 4.4% in 2025, before an expected recovery to 4.2% in 2027.
For Sub-Saharan Africa, the World Bank projected growth of 4.0% in 2026 and 4.4% in 2027.
Inflation remains a concern
Higher energy prices are one of the main factors complicating the global economic outlook.
The World Bank’s June forecast projected global inflation at 4.0% in 2026, compared with 3.3% in 2025.
The institution linked part of the inflation pressure to disruptions in energy markets and higher commodity prices.
Higher energy costs can affect economies through several channels.
Transport becomes more expensive, manufacturers face higher production costs and households may spend more on fuel and electricity. Businesses can then pass some of those costs to consumers through higher prices.
For countries that import large amounts of energy, the effect can also put pressure on trade balances and currencies.
Interest rates face competing pressures
The inflation outlook also creates difficulties for central banks.
When inflation remains above target, monetary authorities can face pressure to keep interest rates higher or tighten policy.
But higher interest rates can also make borrowing more expensive for households, businesses and governments.
That can reduce investment and consumer spending at a time when weaker growth is already creating pressure.
Recent financial-market developments have reflected this tension.
Reuters reported in September that rising energy prices and inflation concerns were pushing markets to reassess interest-rate expectations in several major economies.
The precise response differs between central banks because inflation, employment, economic growth and financial conditions vary across countries.
Global trade remains more resilient than expected
Despite the wider economic pressures, international trade has not collapsed.
The WTO’s September 9 Goods Trade Barometer recorded a reading of 102.0, above its baseline of 100.
The WTO said the result indicated that merchandise trade was continuing to gain momentum despite persistent geopolitical and policy uncertainty.
Electronic components were among the strongest parts of the index, supported by continued investment related to artificial intelligence.
The WTO reported an electronic-components index reading of 104.9, while export orders recorded 103.5.
However, container shipping remained slightly below trend, with a reading of 99.6.
The figures suggest that some areas of global trade remain strong even while other parts of the trading system face disruption.
Trade tensions remain a major risk
Trade policy remains one of the key uncertainties for the global economy.
The WTO’s 2026 World Trade Report, released on September 15, said the multilateral trading system is facing serious disruption from changes in economic power, greater government intervention, geopolitical tensions, digitalisation and other structural changes.
The WTO said its analysis points to substantial economic costs if the global trading system becomes increasingly fragmented.
In a scenario where the multilateral trading system breaks into geopolitically aligned blocs, WTO economists estimate that global GDP could eventually be 5.1% lower and global exports 18.6% lower than under a cooperative system.
A more severe scenario involving the replacement of multilateral cooperation with a network of free-trade agreements could reduce global GDP by 6.9% and exports by 26.9%, according to the report’s modelling.
These are long-term scenario estimates, not forecasts of what will happen in 2026 or 2027.
Trade policy activity has increased
The WTO and IMF have also been tracking changes in global tariff policy.
Their tariff tracker was updated in September to provide information on changes in effectively applied import duties across reporting economies.
Earlier WTO analysis found that global trade-policy activity had risen sharply.
The organisation said activity between January and May 2026 was nearly twice its 2024 level and about a quarter higher than the 2025 average.
That does not mean every new trade measure restricts commerce.
Governments have also introduced measures intended to facilitate trade.
The broader issue is that businesses face greater uncertainty when tariffs, subsidies, market-access rules and other trade policies change frequently.
Energy prices add another layer of uncertainty
Energy markets remain particularly important to the global outlook.
The World Bank’s June assessment said disruptions around the Strait of Hormuz had affected crude oil, liquefied natural gas and fertiliser markets.
Its baseline forecast assumed that the most acute phase of the disruption would ease and that shipping through the strait would move back towards normal levels by the end of 2026.
That assumption creates an important risk for the forecast.
If disruptions last longer or become more severe, energy prices could remain elevated for longer than expected.
That could increase inflation and reduce household purchasing power while also raising production and transportation costs.
The World Bank warned that a combination of more severe energy disruptions and financial stress could push global growth substantially lower than its baseline forecast.
Commodity markets are closely linked to inflation
Oil is not the only commodity affected by the global environment.
Fertiliser prices are also important because higher input costs can increase agricultural production expenses and eventually affect food prices.
The World Bank’s June report said commodity prices were expected to rise significantly in 2026, with disruptions to energy and fertiliser markets creating broader inflationary effects.
For developing countries, these movements can have particularly important consequences.
Countries that depend heavily on imported fuel, fertiliser or food can experience higher import bills when global commodity prices rise.
At the same time, commodity-exporting countries may benefit from higher prices for products they sell abroad.
The effect therefore depends heavily on the structure of each economy.
Artificial intelligence is supporting parts of global trade
One unusual source of resilience in the current environment is the continued strength of trade related to artificial intelligence.
The World Bank noted that demand for AI-related products was helping support goods trade even as overall global trade growth slowed.
The WTO also identified electronic components as a strong part of its latest trade barometer.
Semiconductors, computing equipment and other technology products have therefore become important contributors to international trade.
This creates a contrast within the global economy.
Some sectors are facing weaker demand and higher costs, while technology-related investment is supporting activity in other areas.
Developing economies face different pressures
The global slowdown matters differently across countries.
Developing economies can be particularly exposed to movements in commodity prices, exchange rates, interest rates and international capital flows.
Higher global interest rates can increase financing costs.
A stronger US dollar can also increase the local-currency cost of servicing dollar-denominated debt.
Meanwhile, higher oil prices can increase import bills for energy-importing economies.
The World Bank said weaker growth in developing economies has also slowed progress toward closing income gaps with advanced economies.
What it means for businesses
For companies operating across borders, the current environment creates several areas to watch.
Changes in tariffs can alter the cost of imported inputs and finished products.
Higher energy prices can affect manufacturing and transportation.
Higher interest rates can increase financing costs.
Currency movements can change the value of international transactions.
Businesses may therefore need to pay closer attention to supply chains, sourcing arrangements and exposure to particular markets.
Companies with highly concentrated supply chains may face greater disruption if shipping routes or trade policies change suddenly.
What it means for consumers
Consumers can feel the global economic situation through prices rather than economic forecasts.
Higher oil prices can affect fuel and transportation costs.
Higher fertiliser prices can contribute to higher food-production costs.
Higher interest rates can raise borrowing costs.
Trade restrictions can increase the prices of imported products or encourage businesses to seek alternative suppliers.
The effect will vary by country because governments, currencies, domestic production and consumer markets differ.
The global outlook remains uncertain
The World Bank’s latest forecast provides a baseline rather than a guarantee of what the global economy will achieve.
Several factors could change the outlook.
These include the duration of energy-market disruptions, the direction of trade policy, geopolitical developments, inflation and the response of central banks.
The WTO’s September trade data show that international goods trade has remained resilient, but its broader reports also point to significant structural risks facing the trading system.
The next major update to the WTO’s global trade forecast is expected in October, according to the organisation.
For now, the global economy is operating between two competing forces.
Trade and technology investment are providing some support, while energy disruptions, inflation, financial conditions and trade-policy uncertainty continue to weigh on the outlook.
The World Bank’s latest baseline therefore points to slower global growth in 2026, while more recent WTO indicators suggest that international trade has remained more resilient than the broader economic slowdown might imply.
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