The world economy is expected to slow in 2026 as the energy shock from conflict in the Middle East works through prices, trade and investment, according to UNCTAD, the United Nations trade and development body.
UNCTAD expects world growth to ease to 2.6% in 2026, down from 2.9% in 2025. The forecast paints a picture of an economy still expanding, but with less momentum and with the gains spread unevenly across regions. Higher energy costs sit at the centre of the slowdown, raising transport and production expenses for importers while handing windfall revenue to exporters.
Trade, however, is not expected to stall. UNCTAD projects that trade in goods and services may expand by 4% in constant prices, following a record $35 trillion in 2025. Part of that resilience is mechanical: when energy prices rise, the value of traded fuel rises with them, lifting headline trade even where real volumes are soft. Underneath, supply chains continue to adjust to dearer fuel and insurance.
Asia remains the engine of what growth there is. The region is projected to account for 59% of global growth, led by India at 7.3%, with China at 4.5% and Indonesia at 5.2%, according to the outlook. Those figures underline a familiar pattern: large Asian economies expanding on domestic demand and manufacturing, while energy-importing regions carry more of the shock’s cost.
For policymakers, the mix is awkward. Slower growth argues for support, but energy-driven inflation limits how far central banks can cut rates without risking another price spiral. Governments that shield households from fuel costs face heavier subsidy bills; those that pass prices through face public anger.
UNCTAD’s numbers also carry a warning about who pays. Developing economies that import fuel and food, borrow in foreign currency and earn less from exports are the most exposed when energy spikes. A 2.6% world may still be a recession-like year for them.
The forecast is, of course, a forecast. If energy prices ease or the Middle East shock fades, 2026 could do better than projected. If prices stay high, the slowdown could deepen — and Asia’s 59% share of growth would look less like balance and more like dependence.
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