The global economy is showing more resilience than many policymakers expected—but that resilience masks a deeper, slower-burning problem. According to the latest Global Economic Prospects report from the World Bank, global growth is stabilizing despite ongoing trade tensions, geopolitical friction, and policy uncertainty. Yet if current forecasts hold, the world is also drifting toward its weakest growth decade since the 1960s.

Global growth is now projected to ease to 2.6% in 2026 before edging up to 2.7% in 2027. Both figures represent upward revisions from the World Bank’s June forecast, reflecting stronger-than-expected momentum in several large economies—most notably the United States, which accounts for roughly two-thirds of the upward revision to the 2026 outlook.

Resilience Without Momentum

The report describes a global economy that has learned how to absorb shocks, but struggles to generate sustained dynamism. Trade disruptions, tighter financial conditions, and policy shifts have become the norm rather than the exception. Yet growth has not collapsed.

Much of the support in 2025 came from a temporary surge in global trade ahead of anticipated policy changes, alongside rapid adjustments in global supply chains. Those tailwinds, however, are expected to fade in 2026 as trade growth and domestic demand soften.

The World Bank notes that easing global financial conditions and fiscal expansion in several large economies should help cushion the slowdown. Global inflation is projected to edge down to 2.6% in 2026, driven by softer labor markets and lower energy prices. Growth is then expected to strengthen modestly in 2027 as trade flows normalize and policy uncertainty recedes.

Still, the broader trajectory remains concerning.

“If these forecasts hold, the 2020s are on track to be the weakest decade for global growth since the 1960s,” the report finds.

A Widening Gap in Living Standards

One of the most striking findings is the growing divergence in living standards between advanced and developing economies. By the end of 2025, nearly all advanced economies had regained or exceeded their 2019 per capita income levels. In contrast, about one in four developing economies remained below pre-pandemic income levels.

This divergence is not expected to close anytime soon.

Per capita income growth in developing economies is projected to be about 3% in 2026—roughly one percentage point below the average pace recorded between 2000 and 2019. At that rate, per capita income in developing economies would reach only about 12% of the level in advanced economies.

“With each passing year, the global economy has become less capable of generating growth and seemingly more resilient to policy uncertainty,” said Indermit Gill, Chief Economist and Senior Vice President for Development Economics at the World Bank Group. “But economic dynamism and resilience cannot diverge for long without fracturing public finance and credit markets.”

Gill warned that the world economy is now set to grow more slowly than it did during the troubled 1990s—while carrying record levels of public and private debt.

“To avert stagnation and joblessness,” he said, “governments in emerging and advanced economies must aggressively liberalize private investment and trade, rein in public consumption, and invest in new technologies and education.”

Developing Economies: Slowing Before Stabilizing

Growth in developing economies is expected to slow to 4% in 2026, down from 4.2% in 2025, before edging up to 4.1% in 2027. The World Bank attributes the near-term slowdown to softer global demand and lingering trade frictions, with a modest recovery anticipated as financial conditions improve, commodity prices stabilize, and investment flows strengthen.

Low-income countries are projected to grow faster than the developing-economy average, reaching around 5.6% over 2026–27. This growth is expected to be supported by firming domestic demand, recovering exports, and moderating inflation. Even so, the pace will not be sufficient to significantly narrow the income gap with advanced economies.

A Looming Jobs Challenge

The slower growth outlook has major implications for employment—particularly in developing economies, where an estimated 1.2 billion young people will reach working age over the next decade.

The report argues that meeting this challenge will require a comprehensive policy response built on three pillars:

• strengthening physical, digital, and human capital to raise productivity and employability
• improving the business environment by enhancing policy credibility and regulatory certainty
• mobilizing private capital at scale to support investment

Together, these measures could shift job creation toward more productive and formal employment, supporting income growth and poverty reduction.

Debt, Fiscal Rules, and the Limits of Resilience

The report also highlights mounting fiscal pressures across developing economies. Public debt has risen sharply in recent years, driven by overlapping shocks, growing development needs, and higher debt-servicing costs.

A special-focus chapter examines the role of fiscal rules—formal limits on borrowing, spending, deficits, or revenues—in restoring fiscal sustainability. More than half of developing economies now have at least one fiscal rule in place.

The findings are striking: developing economies that adopt fiscal rules typically see their budget balances improve by about 1.4 percentage points of GDP after five years, once interest payments and business-cycle effects are stripped out. Fiscal rules also increase by 9 percentage points the likelihood of a sustained, multi-year improvement in budget balances.

“With public debt in emerging and developing economies at its highest level in more than half a century, restoring fiscal credibility has become an urgent priority,” said M. Ayhan Kose, Deputy Chief Economist and Director of the World Bank’s Prospects Group.

“Well-designed fiscal rules can help governments stabilize debt, rebuild policy buffers, and respond more effectively to shocks,” Kose said. “But rules alone are not enough: credibility, enforcement, and political commitment ultimately determine whether fiscal rules deliver stability and growth.”

The report concludes that while the global economy has proven unexpectedly resilient, resilience alone is not a growth strategy. Without reforms that restore investment, productivity, and fiscal credibility, the world risks settling into a prolonged era of slower growth—one that deepens inequality and strains public finances just as demographic pressures intensify.