World Economic Situation and Prospects 2026

During 2025, unexpected resilience to sharp increases in U.S. tariffs, supported by solid consumer spending and easing inflation, helped sustain growth. However, underlying weaknesses persist. Subdued investment and limited fiscal space are weighing on economic activity, raising the prospect that the world economy could settle into a persistently slower growth path than in the pre-pandemic era.

The report notes that a partial easing of trade tensions helped limit disruptions to international commerce. However, the impact of higher tariffs, coupled with elevated macroeconomic uncertainties, is expected to become more evident in 2026. Financial conditions have eased amid monetary loosening and improved sentiment, but risks remain high given stretched valuations—especially in sectors linked to rapid advances in artificial intelligence. Meanwhile, high debt levels and borrowing costs are constraining policy space, especially for many developing economies.