World Bank Raises Global Economic Forecasts for 2026 Despite Trade Tensions

SadaNews - The World Bank has raised its growth forecasts for the economy this year, stating that the global economy has shown a surprising ability to withstand a "historic" escalation in trade tensions.

The Washington-based lender reported in a report released on Tuesday that real GDP is expected to rise by 2.6% in 2026, compared to the June forecast of 2.3%.

The U.S. economy also saw a notable upward revision, with growth estimated at 2.2% this year, compared to 1.6% in previous estimates.

The new global forecasts for 2026 indicate a slight slowdown compared to stronger growth in 2025 than the bank had anticipated. A surge in trade, with companies and households rushing to import goods in anticipation of tariffs intended by U.S. President Donald Trump, along with a less than expected impact from high tariffs on imports and increased spending on artificial intelligence, supported global economic growth to reach about 2.7% last year, according to the report.

Notable Resilience of the Global Economy

Ayhan Kose, the World Bank's deputy chief economist, said: "Global growth has become confined within a defined range. There is some resilience, but growth is not accelerating," noting that real GDP growth has remained between 2.6% and 2.8% since 2023, compared to an average of 3.2% in the decade preceding the COVID-19 pandemic.

The World Bank follows the International Monetary Fund in raising its growth estimates for 2025. The Fund had upgraded its forecasts for last year in October, while simultaneously warning of upcoming pressures and challenges, with updated forecasts to be released on Monday.

The World Bank stated that the resilience of the global economy was "remarkable," but that risks still lean toward the downside. It added: "There are significant risks that trade tensions might escalate again, especially since higher tariffs could redirect exports to third countries, leading domestic producers in those countries to seek protection from increased import competition."

The World Bank report also indicated that:

China's economy is expected to grow by 4.9% in 2025 and 4.4% in 2026, both estimates higher than previous projections.

Global inflation rate is expected to decrease to 2.6% in 2026, which is about 0.3 percentage points lower than previous estimates.

The price of Brent crude is expected to drop to $60 per barrel in 2026, compared to an average of $69 in 2025.

Job creation remains a priority, as about 1.2 billion young people will enter the labor force in emerging markets over the next decade.