Global economy shows resilience, but trade tensions and fiscal strains cloud outlook, UN warns in World Economy News 12/01/2026 Global economic output is forecast to grow by 2.7 per cent in 2026, slightly below the 2.8 per cent estimated for 2025 and well below the pre-pandemic average of 3.2 per cent, according to the World Economic Situation and Prospects 2026, released by the United Nations. 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. “A combination of economic, geopolitical and technological tensions is reshaping the global landscape, generating new economic uncertainty and social vulnerabilities,” said United Nations Secretary-General António Guterres. “Many developing economies continue to struggle and, as a result, progress towards the Sustainable Development Goals remains distant for much of the world.” Regional economic outlook: expansion broadly steady, but uneven Economic growth in the United States is projected at 2.0 per cent in 2026, compared to 1.9 per cent in 2025, supported by monetary and fiscal easing. However, a softening labour market will likely weigh on momentum. In the European Union, economic growth is forecast at 1.3 per cent in 2026, down from 1.5 per cent in 2025, as higher U.S. tariffs and ongoing geopolitical uncertainty dampen exports. Output in Japan is expected to expand by 0.9 per cent in 2026, compared with 1.2 per cent in 2025, with a modest domestic recovery partly offsetting weaker external conditions. In the Commonwealth of Independent States and Georgia, growth is projected at 2.1 per cent in 2026, mostly unchanged from 2025, even as the war in Ukraine continues to weigh on macroeconomic conditions. In East Asia, growth is projected at 4.4 per cent in 2026, down from 4.9 per cent in 2025 as the boost from front-loaded exports fades. China’s economy is expected to grow by 4.6 per cent, slightly lower than in 2025, supported by targeted policy measures. In South Asia, growth is forecast at 5.6 per cent in 2026, easing from 5.9 per cent, led by India’s 6.6 per cent expansion, driven by resilient consumption and substantial public investment. In Africa, output is projected to grow by 4.0 per cent in 2026, marginally up from 3.9 per cent in 2025. However, high debt and climate-related shocks pose significant risks. In Western Asia, GDP is expected to grow by 4.1 per cent in 2026, up from 3.4 per cent in 2025, yet the region remains exposed to geopolitical tensions and security risks. In Latin America and the Caribbean, output is expected to expand by 2.3 per cent in 2026, slightly down from 2.4 per