After entering 2026 stronger than expected, the global economy is now projected to slow as uncertainty weighs on trade, investment and supply chains, a United Nations update warns.
In a follow-up to the “Trade and Development Report 2025,” the UN Conference on Trade and Development (UNCTAD) said global growth is expected to slow to 2.6% in 2026, down from 2.9% last year, due to rising geopolitical tensions, the most significant of which is the Middle East conflict that erupted in February.
“In late February 2026, geopolitics surpassed trade policy uncertainty as the primary concern, threatening energy markets, shipping routes and global financial conditions,” said the update.
The global economy is moving from an initial phase of supply disruptions and inflation into a more fragile period, where prolonged uncertainty could trigger shortages and wider financial stress, added the report titled “Trade and Development Foresights 2026.”
Developing countries in particular face significant macroeconomic and financial pressures. Rising import bills for energy, food and fertilizers, along with weaker external demand, are undermining growth prospects. Across the Global South, countries face a renewed threat of capital flight and higher borrowing costs, said the report released on May 19.
Developing economies are projected to grow by 4.1% this year compared to 4.7% last year. In Southeast Asia, growth is expected to decelerate to 4.3% in 2026 from 4.8% last year.
Meanwhile, global merchandise trade remained relatively strong through early 2026, but much of the momentum was concentrated in AI-related products such as semiconductors, servers and data-processing equipment.
Outside these sectors, trade growth remained far more modest, especially in traditional industries and commodity-linked sectors.
UNCTAD now expects global merchandise trade growth to slow from 4.7% in 2025 to between 1.5% and 2.5% in 2026.
The report also highlights increasing pressure on global food systems.
Higher energy prices are driving up fertilizer costs and adding to food inflation pressures across many developing economies. At the same time, volatility and tighter financing conditions are exposing vulnerabilities across global food trading systems.
The paper further points out that these geopolitical tensions are amplifying food security risks. Food security is no longer only about availability and prices but increasingly a matter of financial stability as well.
To strengthen resilience amid rising risks, UNCTAD urged countries to invest in and transition to renewable energy to reduce exposure to fossil fuel shocks.
“By advancing renewable energy and strategic diversification, countries can reduce vulnerability to future economic shocks and contribute to a more balanced global economic landscape,” it said.