UNCTAD said global growth could slow to 2.6% in 2026 as the Middle East crisis drives an energy shock. The report also highlighted Asia's growth role, shifting trade flows and AI-linked market risks.
Global economic growth is expected to slow to 2.6% in 2026 from 2.9% last year as the energy shock triggered by the crisis in the Middle East puts pressure on the world economy, the United Nations trade and development body UNCTAD said on Friday.
In its Trade and Development Report, UNCTAD said global trade in goods and services is projected to expand by 4% in constant prices this year, following a record $35 trillion in global trade in 2025. However, higher energy prices are expected to drive much of the projected increase in trade.
The outlook comes amid rising geopolitical risks, changes in global trade patterns and concerns over the financial risks associated with the artificial intelligence boom.
ASIA TO DRIVE GLOBAL GROWTH
Asia is projected to account for 59% of global economic growth in 2026, with India expected to expand by 7.3%, China by 4.5% and Indonesia by 5.2%, according to UNCTAD.
The projections underline Asia's role in supporting global growth even as the wider economy faces pressure from the Middle East crisis and higher energy prices.
India's projected growth rate of 7.3% is higher than the forecasts for China and Indonesia in the report.
US-CHINA TRADE SHIFTS AS TENSIONS CONTINUE
Trade between China and the United States has fallen by more than 20% since 2024, while East Asia has expanded trade with both China and North America, UNCTAD said.
The agency also warned that restrictions on trade and investment are making it harder for new companies to enter strategic sectors.
"Export controls, investment screening and supply-chain conditions make strategic sectors harder for new entrants to access," UNCTAD said.
The shift in trade flows points to changes in how countries and businesses organise supply chains as trade restrictions and geopolitical tensions affect global commerce.
AI BOOM BRINGS TRADE OPPORTUNITIES, FINANCIAL RISKS
Artificial intelligence-related products, including semiconductors, are emerging as the main driver of merchandise trade, according to UNCTAD.
However, the agency cautioned that growth in AI-related trade does not automatically translate into broader development gains.
It also warned that the AI boom could pose risks to financial stability as markets become increasingly exposed to a small number of companies. UNCTAD did not name the companies in its assessment.
The warning highlights the risks of relying on a narrow group of businesses to sustain market gains, even as demand for AI-related products supports trade.
WORLD BANK, IMF OFFER DIFFERENT GROWTH OUTLOOKS
The World Bank cut its global growth forecast to 2.5% in June, citing the impact of the war in the Middle East. In a worst-case scenario, it sees growth falling to 1.3%.
The International Monetary Fund has a more optimistic global growth forecast of 3%, but has also flagged the Iran war, trade fragmentation and potential AI-related market corrections as risks.
UNCTAD's projection of 2.6% growth places its outlook between the World Bank's forecast and the IMF's estimate, pointing to continued uncertainty over the global economic outlook.