Global Economy: The Outlook for 2025–26
Global Economic Outlook: Steady Growth with Challenges
The good news is that global growth is expected to stabilize at 2.7 percent in 2024 and remain steady through 2025-26, according to the Global Economic Prospects Report. However, this growth rate is not sufficient to repair the damage caused by several years of negative shocks. As a result, the global economy faces significant challenges, especially in the most vulnerable countries.
In the long run, emerging market and developing economies (EMDEs) have struggled to catch up to advanced economies. Over the first quarter of the twenty-first century, this catch-up has weakened. Additionally, progress in reducing extreme poverty has slowed markedly. Moreover, increased policy uncertainty and negative shifts in trade policies pose major risks to the global economic outlook.
The global economy appears to be settling into a steady, albeit slow, growth rate. Between 2025 and 2026, slower growth in the United States and China will be balanced by stronger growth in other regions, including many EMDEs. Overall, global expansion is expected to be slower than the growth rates seen before the pandemic.
Furthermore, the current growth rate is not enough to support sustained economic development or to reduce the income gap with advanced economies. EMDEs are projected to see per capita income growth of about 3.1 percent in 2025-26. This is significantly lower than the average growth from 2000 to 2019. Without the contributions of China and India, EMDEs have not made progress in closing the income gap with advanced economies since the early 2010s. In the near term, the most vulnerable countries are likely to see their per capita incomes fall further behind those of advanced economies from 2021 to 2026.
Trade growth is expected to strengthen over 2025-26. However, it will still be below the 2010-19 average in nearly two-thirds of economies. Additionally, increased policy uncertainty and negative changes in trade policies remain key risks to global trade and economic activity. Trade restrictions are still common, with the number of new measures in 2024 being five times higher than the 2010-19 average.
In summary, while global growth is stabilizing, it remains too slow to address the economic challenges from past shocks. Emerging markets face a difficult path to catch up, and ongoing trade risks could further hinder global economic progress. Therefore, it is crucial for policymakers to focus on creating stable and supportive environments to foster stronger and more inclusive growth worldwide.
