A World Bank Report states that global economic activity has proven resilient once again as technology upturn, buffers and adaptations have helped mitigate the damage from geopolitics-driven disruptions. Global growth is projected to slow to 3.1 percent in 2026 and rebound to 3.4 percent in 2027. Global headline inflation is projected to rise notably to 4.7 percent in 2026 before easing to 4.1 percent in 2027. Energy-importing economies outside the technology value chain face the most difficult outlook.
But the margins of adjustment that helped resilience are not limitless, and risks are skewed to the downside. Further escalation in conflicts, a reassessment of expectations surrounding artificial intelligence (AI), renewed trade tensions, and fiscal vulnerabilities could weaken growth.
On the upside, stronger momentum in AI investment and productivity gains from AI or a sustained easing of geopolitical and trade tensions could strengthen growth.
Fiscal frameworks must deliver better results when dealing with disruptive shocks and building policy space through revenue measures.
The report shows that, during cost-of-living crises, governments should preserve price signals and rely primarily on temporary, targeted income support for the most vulnerable.
It also finds that the global effects of corporate income tax policy changes depend on how they are financed. Debt-financed tax cuts support domestic activity but can generate negative spillovers abroad in the short term.
Over time, spillovers can be positive, thanks to cross-border knowledge transfer, but lower revenues can constrain public investment domestically, particularly in emerging market and developing economies.
