Jan 18, 2026

1. Global Economic Growth:

According to the World Bank’s Global Economic Prospects Report, global economic growth is expected to remain subdued, slowing down to 2.6%, from the estimated 2.7% growth rate in 2025. The expected economic slowdown is driven by the weakening of trade growth driven by trade tensions and policy uncertainty from higher tariffs. Tariffs have significantly risen since January 2025 and are further expected to rise in 2026, which could further weaken exports and demand. The 2026 inflation rate is expected to ease to 2.6% as compared to the 3.2% estimate in 2025, mainly attributable to weaker labor markets, lower demand for tradable goods, and declining energy prices However, despite the expected easing in inflation, global inflation remains at risk due to higher tariffs, which could increase the cost of imported goods and production inputs, and businesses are likely to pass these additional costs on to consumers, therefore fueling further inflationary pressures. Moreover, the growth in the Emerging Markets and Developing Economies (EMDEs) is expected to ease by 4.0% in 2026, 0.2% points decrease from the estimated growth of 4.2% in 2025;

Growth in 2026 shall be shaped by the following four key themes:

1. Global Trade

The World Bank projects the global trade growth to slow down to 2.2% in 2026 from the 3.4% growth rate in 2025 as the effects of higher tariffs are fully realized over the course of the year. In March 2025, the U.S. implemented country‑ and sector‑specific tariffs, which led major economies such as Canada, China, and the European Union to respond with retaliatory measures. This triggered a global rise in tariffs and heightened uncertainty around trade policies. The full impact of these higher tariffs will emerge gradually, since they initially excluded goods already in transit to the United States. Additionally, the tariff levels introduced in late 2025 are expected to remain in place throughout the year. However, nations with more diversified export markets are projected to see relatively stronger trade growth. In our view, global trade growth will remain constrained in the near term as the temporary boost from stockpiling and front‑loading fades, while the full impact of higher tariffs and weaker demand in major economies increasingly weighs on global goods and services trade.

2. Easing Inflation and Monetary Policies

Inflation is expected to ease in 2026 to 2.6% from  the estimated 3.2% in 2025, with global inflation moving closer to the targets set by central banks in most economies. In line with inflation-targeting strategies, central banks are expected to continue easing monetary policies in 2026, reducing interest rates to stimulate economic activity as inflationary pressures subside. Since 2024, major central banks in advanced economies have cut their policy rates, moving their policy stance towards neutral. Notably, as of December 2025, advanced economies, including the Euro Area, the UK, and the US cumulatively cut their rates by 1.0%, 1.0%, and 0.75%, respectively, compared to the same period in 2024. The change in global monetary conditions is easing the pressure on emerging market economies, with their currencies strengthening against the US dollar and financial conditions improving. This will help reduce imported inflation pressures, allowing these countries to pursue more easily their own disinflation path.

In their latest meeting on 10^th December 2025, the USA Federal Reserve cut their policy rates by 25.0 bps to a range of 3.50%-3.75% from a range of 3.75%-4.00%, marking the third consecutive cut. The Fed’s decision to lower rates was driven by the need to support stable economic activity amid modest wage pressures, rising costs, and growing financial strains on households, while anticipating tariff‑related cost increases in 2026. As of December 2025, the y/y inflation rate stood at 2.7%, unchanged from November 2025. The Fed noted that inflation remains somewhat elevated above the target of 2.0%, and stable economic activity. Additionally, in their most recent sittings, other major economies such as the UK also cut their monetary policy rates by 0.25 bps to 3.75% from 4.00%. On the other hand, in their most recent sittings, Canada, China, Malaysia, Australia and the Euro Area also kept their monetary policy rates unchanged. While lowering rates could stimulate domestic growth and ease financial conditions, they must balance this with the risk of inflationary pressures, currency devaluation, and capital outflows. In our view, upcoming rate cuts are expected to be measured and cautious, given that policy rates have already been declining since 2024. Central banks are therefore likely to ease gradually to support economic activity while avoiding a resurgence of inflationary pressures.

The table below highlights the policy stance adopted by the Central Banks of major economies

Data Source: Cytonn Research

3. Easing Commodity Prices

In 2025, most of the commodity prices were on an upward trajectory. However, the energy prices pulled down the aggregate index. The commodity prices are projected to ease in 2026. According to the World Bank’s Commodity Markets Outlookreport, commodity prices are expected to decrease by 7.0% percent in 2026, after softening 6.5% in 2025. This would lead aggregate commodity prices to their lowest levels since 2020. The projected declines are led by an oversupply in the global oil market, a subdued economic growth and a stable outlook for agricultural and metal commodities. The table below shows select commodity price indices:

Data Source: World Bank

Oil prices have been under downward pressure declining by 11.3% in 2025, higher than the 5.1% decrease which was recorded in 2024, due to weak demand growth in China, the continued rapid adoption of electric and hybrid vehicles, and a further increase in global oil supply. As a result, excess supply in the global oil market expanded significantly in 2025. Oil prices are expected to decline further in 2026 but remain above the pre-pandemic levels as rising non-OPEC+ production, particularly from U.S. shale, alongside the potential for higher-than-expected OPEC+ output, is likely to result in a significantly oversupplied global oil market. In 2026, fertilizer prices are projected to decline by 2.7%, from the 17.9% increase recorded in 2025. This decline is attributed to elevated input costs, ongoing export restrictions, and sanctions, including China’s limits on nitrogen and phosphate fertilizer exports and continued EU sanctions and tariffs affecting major suppliers such as Belarus and Russia. Similarly, food prices, which represent the largest component of the World Bank Agriculture Commodity Index, are expected to fall by 2.3% in 2026. This decline is driven by improved supply conditions for key crops, including expanded soybean acreage in Brazil and better coffee and cocoa production, while U.S. soybean exports are redirected at lower costs. These trends are likely to reduce agricultural input costs, easing inflationary pressures in food-dependent economies. However, risks such as unpredictable weather patterns or trade restrictions could still impact price stability and agricultural output.

4. Public Debt

High debt levels especially in Emerging Markets and developing economies (EMDEs) are expected to persist in 2026 mainly on the back of declining aid from advanced economies, limited progress on debt restructuring and surging debt service costs due to declining global trade and currency depreciation in most economies, coupled with tighter financial conditions undermining economic growth. According to the Global Debt Monitor by (IMF), the global debt (public and non-financial private debt stocks) came in at 235.5% of the GDP, (USD 251.0 tn) in 2024, translating to 0.1% points decline from 235.6% of the GDP (USD 250.0 tn)  recorded in 2023. Conversely, public debt stock as a percentage of GDP increased by 1.0% points to 92.8% in 2024 from 91.8% in 2023. However, given the perceived interest cuts in 2025, especially in developed economies such as the US, global debt levels may experience mixed impacts. While reduced borrowing costs could ease the debt servicing burden for some nations, the elevated refinancing costs for long-term debt and the persistent structural challenges, including fiscal deficits and weak revenue collection, are likely to counteract these benefits. Additionally, geopolitical risks and inflationary pressures, although moderating, remain key concerns that could strain fiscal positions, particularly in EMDEs. In our view, global debt is projected to remain elevated, with governments and corporations facing continued pressure to manage their liabilities amidst a challenging economic and financial landscape.

Below is a summary of the regional growth rates by country as per the World Bank:

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Data Source: World Bank