World Bank projects 5.6% growth in low-income countries by 2027, driven by domestic demand, exports recovery, and easing inflation

The World Bank Group has projected a 5.6 per cent growth rate over the next two years for low-income countries, citing stronger domestic demand, recovery in exports, and easing inflation as key drivers.

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In its latest Global Economic Prospects report, the global lender noted that while growth in developing economies will remain positive, the income gap between advanced and emerging nations will continue to narrow.

Per capita income growth in developing countries is projected at three per cent in 2026, about one percentage point below the 2000 and 2019 average, leaving income levels at only 12 per cent of those in advanced economies.

Global inflation is expected to ease to 2.6 per cent in 2026, reflecting softer labour markets and lower energy costs. Growth is anticipated to accelerate in 2027 as trade flows adjust and policy uncertainty diminishes.

The World Bank projects growth in developing economies to dip slightly to 4 per cent in 2026 from 4.2 per cent in 2025 before rising to 4.1 per cent in 2027, supported by stabilising commodity prices, improved financial conditions, and increased investment flows.

Chief Economist and Senior Vice President for Development Economics, Indermit Gill, highlighted the resilience of the global economy despite slower growth compared with previous decades.

He stressed that governments must prioritise private investment, trade liberalisation, technology, and education to avoid stagnation and joblessness.

Deputy Chief Economist M. Ayhan Kose warned that high public debt in emerging and developing economies remains a pressing challenge.

He emphasised the need for well-designed fiscal rules to stabilise debt, rebuild policy buffers, and enhance growth, noting that more than half of developing economies now implement at least one fiscal rule.

“Fiscal rules alone are insufficient; credibility, enforcement, and political commitment ultimately determine their effectiveness in promoting stability and growth,” Kose said.

The report also noted that the global economy has shown unexpected resilience despite trade tensions and policy uncertainty, with the United States accounting for much of the upward revision to the 2026 forecast.

However, the World Bank cautioned that the 2020s may emerge as the weakest decade for global growth since the 1960s, potentially widening global living standards gaps.

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The report concludes that easing global financial conditions and fiscal expansions in major economies will partially cushion the slowdown, but sustainable growth in low-income countries will require continued investment in domestic demand, exports, and fiscal stability.