World Bank: Global economy ‘more resilient than expected’
The global economy has been “markedly more resilient than expected” against a hostile backdrop of geopolitical and trade uncertainty, according to the World Bank which has upgraded its growth forecast for 2026.
In its biannual assessment of the international economic outlook, the world’s preeminent financial body said that the “limited” pass-through of tariffs onto prices and the artificial intelligence investment splurge helped economies largely shrug off predictions of a slowdown in growth.
The bank predicts global economic growth to edge down to 2.6 per cent in 2026 from 2.7 per cent the previous year. But the projection is far higher than the 2.3 per cent growth for the coming 12 months forecast by the bank’s economists in June, as the worst of Donald Trump’s tariff threats were largely avoided and businesses raced to invest and roll out AI.
“The global economy has shown greater-than-expected resilience to major shifts in the trading system, heightened policy uncertainty, and geopolitical tensions,” authors of the World Bank’s flagship Global Economic Prospects report wrote. “In part, this reflects shortterm support for activity last year that stemmed from the stockpiling of traded goods, as well as easier financial conditions amid expectations of further monetary easing.”
World Bank economists singled out the United States’ performance as especially buoyant, upgrading their growth estimate for the world’s largest economy by some 0.6 per cent to 2.2 per cent. The update constituted the bank’s single largest upward revision since its last temperature check in the summer.
The US was a particular beneficiary of the surge in spending on AI and the growth in trade policies, which the organisation said was “sharply higher” than in previous forecasts.
World Bank warns of trade and stock market risks
But officials also warned that near-term risks to their buoyant outlook were “tilted to the downside”, should the looming threat of further trade barriers materialise or stretched financial markets show signs of a impending downturn.
“The effects of a retrenchment in risk appetite and a confidence shock in advanced economies could be substantial,” they wrote. “A decline in household wealth would lead to weaker consumption. Financial institutions would likely amplify the downturn by tightening credit conditions.”
The remarks add to a growing bank of warnings from some of the world’s largest financial institutions that riskier asset classes are demonstrating signs of overvaluation, making them liable to a sharp correction in the near future.
In a separate report published on Tuesday, Blackrock included diversifying away from frothy US equities as one of its three key pieces of guidance for investment portfolios in 2026.
Alongside a continued faith in AI and advice to focus on high-income-generating bonds, the world’s largest asset manager said investors should have no more than 15 per cent of their equities portfolios in US stocks. A “deep buffer strategy”, including upping exposure to gold and cash, would help cushion from “US equity corrections of minus five to -20 per cent”, according to Tom Becker, a senior portfolio manager at the investment juggernaut.
The World Bank’s forecast also identified continued supply chain flexibility and a broadening out of AI investment as having the potential to help the global economy outperform its projection of 2.6 per cent growth.