The global economy is showing greater resilience than expected despite historic trade tensions and policy uncertainty, with growth projected to remain broadly steady over the next two years, the World Bank said on Tuesday.

In its latest Global Economic Prospects report, the World Bank said that global growth is projected to ease to 2.6 per cent in 2026 before edging up to 2.7 per cent in 2027, an upward revision from earlier forecasts.

The stronger-than-anticipated performance reflects "better-than-expected growth—especially in the United States, which accounts for about two-thirds of the upward revision to the forecast in 2026", the report noted.

Despite the resilience, the World Bank warned that if current forecasts hold, the 2020s will be the weakest decade for global growth since the 1960s. The slow pace is widening income gaps, with nearly all advanced economies exceeding pre-pandemic income levels, while "about one in four developing economies" remains poorer than in 2019.

Growth in 2025 was supported by front-loading of trade ahead of policy changes, swift supply-chain adjustments, and easing financial conditions. These factors are expected to fade in 2026 as trade and domestic demand soften.

Global inflation is projected to decline to 2.6 per cent in 2026, reflecting softer labour markets and lower energy prices. Growth is expected to pick up in 2027 as trade flows adjust and policy uncertainty diminishes.

"With each passing year, the global economy has become less capable of generating growth and seemingly more resilient to policy uncertainty," said Indermit Gill, the World Bank Group’s Chief Economist and Senior Vice President for Development Economics. He warned that slower growth combined with record public and private debt risks "fracturing public finance and credit markets".

Gill urged governments to liberalise private investment and trade, rein in public consumption, and invest in technology and education to avoid stagnation and joblessness.

The World Bank said growth in developing economies is expected to slow to 4 per cent in 2026 before rising to 4.1 pe rcent in 2027, driven by easing trade tensions, stabilising commodity prices, and improved financial conditions.

Low-income countries are projected to grow at an average of 5.6 per cent over 2026-27, but this will not be sufficient to narrow income gaps with advanced economies.

The report highlighted the growing jobs challenge, noting that 1.2 billion young people in developing economies will reach working age over the next decade. It said addressing this challenge will require coordinated reforms to boost productivity, improve business environments, and mobilise private capital.

The World Bank also warned that fiscal sustainability in many developing economies has been eroded by overlapping shocks and rising debt-servicing costs.

"With public debt in emerging and developing economies at its highest level in more than half a century, restoring fiscal credibility has become an urgent priority," said M. Ayhan Kose, the World Bank Group’s Deputy Chief Economist.