Global Economy Expands, Emerging Markets Continue to Lag: World Bank Global Economic Prospects

WASHINGTON, Feb. 12, 2026 — The global economy is projected to expand at a moderate pace over the next two years, supported by resilient consumer demand, easing inflation trends, and stable labor markets in several advanced economies, according to the World Bank Global Economic Prospects. Even so, the outlook highlights a widening divergence between wealthier nations and much of the developing world, where growth remains constrained by debt burdens, weak investment, and demographic headwinds.

After a period marked by pandemic disruption and financial tightening, global output has avoided a sharp downturn. Advanced economies have benefited from service-sector activity and improving household balance sheets, which have helped sustain spending despite elevated borrowing costs. Inflation has slowed across many regions, offering some relief to consumers and policymakers, though price growth remains above pre-pandemic norms in several economies.

Yet this expansion is uneven. Growth rates in developing economies are expected to remain below historical averages, limiting progress on income convergence. The World Bank notes that many lower- and middle-income countries are entering the current phase of global expansion from a weaker starting point, shaped by years of subdued investment and mounting fiscal constraints.

Advanced Economies Drive Momentum

Economic activity in advanced economies continues to provide much of the global momentum. The United States has shown resilience through consumer spending and employment gains, even as tighter financial conditions persist. In Europe, growth remains modest but stable, supported by easing energy costs and gradual improvement in real incomes. Japan’s outlook reflects moderate expansion tied to domestic demand and a gradual recovery in business investment.

These economies benefit from deeper financial markets and stronger institutional capacity, which have helped cushion the effects of higher interest rates. Fiscal support deployed during the pandemic has also left households with buffers that continue to support consumption. Together, these factors have reduced near-term downside risks to global output.

Still, the report cautions that longer-term challenges remain. Aging populations, slower productivity growth, and geopolitical fragmentation pose risks to sustained expansion. These structural issues could weigh on potential growth, even if near-term conditions remain supportive.

Developing Economies Remain Behind

The outlook for developing economies remains more fragile. Growth in many regions has slowed relative to pre-pandemic trends, reflecting weaker external demand, limited fiscal space, and reduced capital inflows. For several countries, the benefits of global expansion have yet to translate into meaningful improvements in living standards.

Income Gaps Persist: Per-capita income growth in developing economies remains insufficient to narrow gaps with advanced economies. Population growth in parts of Sub-Saharan Africa and South Asia continues to dilute income gains, limiting progress in poverty reduction. Labor market recoveries have been uneven, and job creation has struggled to keep pace with demographic trends.

As a result, many households face prolonged adjustment after recent global shocks. Education disruptions and skill mismatches further constrain income prospects, reinforcing disparities across regions.

Debt and Climate Strains: High debt levels continue to weigh on economic prospects in developing countries. Elevated debt servicing costs restrict public spending on infrastructure, health, and education. Access to external financing remains uneven, particularly for low-income and fragile states.

At the same time, climate-related disruptions pose persistent challenges. Extreme weather events have affected agricultural output and food security, placing added strain on public finances and household incomes. These factors limit policy flexibility and slow economic progress.

Trade and Investment Patterns Shift

Global trade growth remains subdued compared with earlier decades, reflecting slower demand growth and changes in supply chain strategies. Investment flows to developing economies have weakened, particularly in countries with higher perceived risk. This trend has constrained capital formation and productivity gains.

Foreign direct investment remains concentrated in a smaller group of emerging markets with stronger institutions and policy frameworks. Other economies struggle to attract long-term investment, limiting their participation in global value chains.

The World Bank notes that improving investment climates and reducing policy uncertainty could support stronger medium-term growth, though progress varies widely across regions.

Risks Shape the Outlook

Downside risks continue to shape the global outlook. Financial market volatility, geopolitical tensions, and renewed inflationary pressures could disrupt growth trajectories. For developing economies, these risks are magnified by limited fiscal buffers and higher exposure to external shocks.

The report highlights that without stronger growth in developing countries, global income convergence will remain elusive. A sustained period of uneven expansion could deepen economic divides, shaping global growth patterns for years to come.

Even with global output on a firmer footing, the World Bank Global Economic Prospects makes clear that the benefits of expansion remain unevenly distributed, leaving many emerging and developing economies struggling to regain lost ground.