New findings from UN Trade and Development (UNCTAD) highlight a challenging global economic landscape through 2026. Worldwide output is projected to grow just 2.6% in both 2025 and 2026 well below the 3% pre-pandemic average and far beneath the 4.4% growth trend seen before the 2008–09 financial crisis.

Major economies are also slowing. Growth in the United States is expected to ease to 1.8% in 2025 and 1.5% in 2026, while China is projected to decelerate from 5% to 4.6%, significantly below its pre-COVID average of 6.7%.

Although the year began with a brief rebound driven by firms accelerating imports ahead of new tariffs and the expansion of the digital and AI economies these temporary boosts are fading. Underlying global trade growth now appears closer to 2.5–3%, with early signs of a broader slowdown already emerging.A central message from UNCTAD’s Trade and Development Report 2025 is the growing influence of financial conditions on global commerce. With over 90% of world trade dependent on trade finance, shifts in interest rates and global risk sentiment now move trade volumes as much as changes in real economic activity.

This financialization is also transforming commodity markets. For many of the world’s largest food and commodity traders, more than 75% of revenue now comes from financial operations rather than the movement of physical goods.

The Global South: Rising Economies, Limited Financial Power

Developing economies continue to grow faster than advanced ones, with output expected to rise 4.3% on average. The global South now accounts for:

  • 40%+ of world GDP

  • Nearly half of global merchandise trade

  • More than half of worldwide investment inflows

Yet these economies hold only 25% of global financial market value and face borrowing costs several times higher than those in advanced economies. Ten-year sovereign yields in many developing countries range from 7% to 11%, compared with 1% to 4% in most advanced markets. These higher costs, combined with volatile capital flows and rising climate-related financial risks, continue to constrain long-term investment and sustainable development.

UNCTAD underscores the urgent need for global financial and trade system reforms, including:

  • Modernizing trade rules to reflect digital trade, services, climate priorities and new industrial strategies

  • Strengthening the international monetary system to reduce destabilizing capital-flow cycles

  • Expanding regional and domestic capital markets to provide more affordable long-term financing

  • Enhancing transparency in commodity trading and improving access to trade finance, particularly for SMEs

As financial forces increasingly shape global trade, business leaders and policymakers face a new strategic imperative: aligning financial stability, sustainable development and real-economy growth.

Source:UNCTAD