New Delhi: Global economic growth is expected to slow to 2.6% in 2026 from 2.9% the previous year, as an energy shock triggered by the ongoing crisis in the Middle East puts downward pressure on the world economy, the United Nations trade and development body UNCTAD reported on Friday.
In its latest Trade and Development Report, UNCTAD projects that global trade in goods and services will expand by 4% in constant prices this year, following a record $35 trillion in global trade achieved in 2025. However, a significant portion of this projected trade increase is expected to be driven by higher energy prices rather than pure volume expansion.
This subdued economic outlook comes against a backdrop of mounting geopolitical risks, shifting international trade patterns, and growing anxieties regarding the financial vulnerabilities linked to the artificial intelligence boom.
Asia is projected to account for 59% of global economic growth in 2026, serving as a vital stabilizing force. UNCTAD forecasts India to expand by 7.3%, outpacing China at 4.5% and Indonesia at 5.2%. These regional figures underscore Asia's continued resilience despite headwinds from the Middle East conflict and elevated energy costs.
Meanwhile, international commerce is undergoing structural reorganization. Trade between China and the United States has declined by over 20% since 2024, while East Asia has simultaneously increased trade volumes with both China and North America. At the same time, UNCTAD cautioned that proliferating trade and investment restrictions, such as export controls and investment screening, are creating high barriers that make it increasingly difficult for new entrants to access strategic industrial sectors.
Technological advancement is also reshaping commerce, with artificial intelligence-related goods like semiconductors emerging as the primary engine of merchandise trade. Nevertheless, UNCTAD warned that the expansion of AI trade does not automatically equate to widespread development benefits. Furthermore, the rapid valuation and concentration of the AI sector could threaten financial stability by exposing global markets heavily to a small cluster of dominant firms.
Other major international institutions offer varying perspectives on the macroeconomic horizon. The World Bank lowered its global growth forecast to 2.5% in June due to the Middle East conflict, warning that growth could plunge to 1.3% in a worst-case scenario. Conversely, the International Monetary Fund maintains a more optimistic 3% growth projection, though it shares concerns over regional wars, trade fragmentation, and potential AI market corrections. UNCTAD's 2.6% projection sits between these differing institutional forecasts amid persistent global uncertainty.