The global economy may face long-term low growth risks
The report "World Economic Situation and Prospects for 2026" recently released by the United Nations Conference on Trade and Development pointed out that although the United States will significantly increase tariffs in 2025, the global economy has shown unexpected resilience and maintained growth momentum, supported by stable consumer spending and falling inflation. However, deep-seated vulnerabilities still exist. Continued sluggish investment and limited fiscal space are dragging down economic activity and increasing the risk of long-term low growth for the global economy. The report predicts that the world economy will grow by 2.7% in 2026, slightly lower than the estimated growth rate of 2.8% in 2025.
Global inflation has fallen, but the pressure on residents' living costs remains high. The report points out that global inflation has fallen from its peak in 2021-2023, with a global inflation rate of about 3.4% in 2025 and expected to further decrease to 3.1% in 2026. However, price levels remain high, and the rising cost of living continues to erode the purchasing power of low-income groups. Among them, the cumulative increase in food, energy, and housing prices remains significant, with low-income households, rural populations, and female groups being more affected. In addition, climate anomalies and geopolitical risks may once again push up energy and food prices.
Global trade remains resilient, but growth will continue to slow down. The report points out that the global trade growth rate in 2025 will be 3.8%, which is better than expected. However, due to the weakening of the "early export" effect caused by the imposition of tariffs in 2025, it is expected that the global trade growth rate will drop to 2.2% in 2026. Although the overall growth rate has slowed down, the growth of service trade such as tourism and digital services is strong. In addition, companies are also diversifying their supply chains, moving closer to the coast, and expanding their South South trade layout to enhance their resilience in responding to trade policy shocks.
The investment and financial environment has rebounded, but risks still exist. The report points out that global investment activity remains sluggish, with geopolitical and policy uncertainties suppressing investment willingness. Artificial intelligence related investments are a few bright spots, but investments in digital infrastructure are mainly concentrated in China, the United States, and some European countries, with relatively insufficient inclusiveness, and foreign direct investment in developing countries continues to be weak. The financial market is active, but there is an asset foam risk, especially the valuation of technology stocks is high, and the risk of non bank financial institutions is rising.
The labor market is stable, but structural issues are prominent. The report points out that the global unemployment rate remains stable, but the employment problems of youth and women are serious. By 2025, the global unemployment rate is expected to be around 5%, with approximately 257 million young people (one-fifth of the total youth population) in a state of "unemployment, lack of education, and lack of training". In addition, the labor force participation rate of women is still significantly lower than that of men, and employment barriers for people with disabilities persist.
The development potential of artificial intelligence is enormous, but the differentiation is intensifying. In the long run, artificial intelligence will improve productivity, and this improvement has been confirmed at the micro level. However, the short-term impact is still uncertain, as there are significant differences in technological capabilities, infrastructure, and investment capabilities among countries, with varying degrees of benefit. Artificial intelligence may also change the employment structure and have a significant impact on middle and high skilled positions. To better harness the development of artificial intelligence and benefit from it, skills training, digital infrastructure, and competition policy are indispensable.
The world's sustainable development goals are seriously lagging behind or have no hope of being achieved. Currently, poverty, environmental issues, and inequality remain severe, making it difficult to achieve the United Nations Sustainable Development Goals as scheduled. The number of people living in extreme poverty has only slightly decreased, and is mainly concentrated in sub Saharan African countries. By 2025, global carbon emissions will reach a historic high, frequent climate disasters will drive up food prices and increase fiscal burdens, developing countries will experience weak per capita income growth, and the convergence rate of global wealth inequality will slow down.
Regional differences are evident, and the differentiation of emerging economies is intensifying. The report believes that the gap in future development among economies will become more prominent, with developed economies maintaining moderate growth while emerging economies will experience intensified differentiation. It is expected that the growth rate of the US Gross Domestic Product (GDP) will be around 2.0% in 2026, but inflation will still be higher than the target. The EU has limited growth due to energy costs and aging. The GDP growth rate of the least developed countries is about 4.6%, far below the 7% target in the Sustainable Development Goals. The report also predicts that the GDP of East Asia will grow by 4.4%, South Asia by 5.6%, Africa by 4.0%, and Latin America and the Caribbean by 2.3% in 2026.
The space for fiscal and monetary policies is limited. The report predicts that global monetary policy will shift towards easing in 2026, but believes that policy room is limited, with developing countries facing greater fiscal pressure. Globally, about two-thirds of central banks have entered a cycle of interest rate cuts, but policy rates remain higher than pre pandemic levels. Development aid is expected to continue to decline and may fall back to 2020 levels. High debt levels will further limit social spending and infrastructure investment.
Multilateral cooperation remains the key to addressing challenges. The report points out that the current global economy is in a stage of high fragmentation and multiple risks, and unilateral actions are difficult to solve global problems. Rebuilding trust in a fragmented world and promoting inclusive, sustainable, and resilient global development is the core goal of international cooperation. The report particularly focuses on three key multilateral initiatives and cooperation frameworks, namely the Seville Commitment to serve the reform of the global development financing system, the Doha Political Declaration focusing on "human" development, and the Belem Plan to address climate change. In addition, the report emphasizes the indispensable role of international cooperation in maintaining the multilateral trading system, strengthening the governance of artificial intelligence and digital technology, stabilizing inflation, and helping fragile countries meet severe challenges.