Global economic growth is forecast to decelerate to 2.6% in 2026, down from 2.9% last year, as the energy shock caused by the Middle East crisis weighs on the world economy, the United Nations trade and development agency UNCTAD said on Friday.
In its Trade and Development Report, UNCTAD projected that global trade in goods and services would grow by 4% in constant prices this year, following a record $35 trillion in global trade in 2025. However, the agency expects higher energy prices to account for a substantial portion of the projected growth in trade.
The forecast comes against a backdrop of increasing geopolitical tensions, shifting global trade patterns and concerns about financial risks linked to the artificial intelligence boom.
ASIA TO DRIVE GLOBAL GROWTH
Asia is expected to contribute 59% of global economic growth in 2026, with India projected to grow by 7.3%, China by 4.5% and Indonesia by 5.2%, according to UNCTAD.
These estimates highlight Asia's importance in sustaining global economic expansion even as the broader economy faces challenges from the Middle East crisis and rising energy costs.
India's projected growth of 7.3% exceeds the forecasts for both China and Indonesia in the report.
US-CHINA TRADE SHIFTS AS TENSIONS CONTINUE
Trade between China and the United States has declined by more than 20% since 2024, while East Asian economies have increased trade with both China and North America, UNCTAD reported.
The agency also cautioned that restrictions on trade and investment are creating obstacles for new businesses attempting to enter strategically important industries.
"Export controls, investment screening and supply-chain conditions make strategic sectors harder for new entrants to access," UNCTAD said.
These changing trade flows reflect how countries and businesses are reorganising their supply chains as geopolitical tensions and trade barriers reshape international commerce.
AI BOOM BRINGS TRADE OPPORTUNITIES, FINANCIAL RISKS
According to UNCTAD, artificial intelligence-related products, including semiconductors, are becoming the primary drivers of merchandise trade.
However, the agency warned that expanding trade in AI-related products does not necessarily lead to wider economic development benefits.
It also highlighted potential threats to financial stability from the AI boom, noting that markets are becoming increasingly dependent on a relatively small number of companies. UNCTAD did not identify the companies in its assessment.
The warning underscores the dangers of relying on a limited group of businesses to sustain market gains, even as demand for AI-related products boosts global trade.
WORLD BANK, IMF OFFER DIFFERENT GROWTH OUTLOOKS
The World Bank lowered its global economic growth forecast to 2.5% in June, citing the effects of the Middle East conflict. Under a worst-case scenario, it expects growth to fall to 1.3%.
The International Monetary Fund has a more optimistic projection, forecasting global growth of 3%. However, it has also warned of risks arising from the Iran war, fragmentation of global trade and possible market corrections linked to AI.
UNCTAD's forecast of 2.6% growth falls between the World Bank's estimate and the IMF's projection, highlighting continued uncertainty surrounding the global economic outlook.
