The United Nations Conference on Trade and Development said Friday that global economic growth will ease to 2.6 percent this year, down from 2.9 percent in 2025, as the war in the Middle East keeps energy costs elevated and capital flows jumpy.
Presenting its Trade and Development Report 2026 in Geneva, UNCTAD said developing economies as a group are still expected to expand by 4 percent, but that figure masks a widening gap: outside a handful of fast-growing Asian economies, convergence with advanced nations has stalled since the mid-2010s.
Energy shock and borrowing costs
Acting Secretary-General Pedro Manuel Moreno said stronger-than-expected headline resilience hides deepening divergence. The Middle East conflict sent Brent crude from about $70 a barrel to more than $110 in the weeks after fighting escalated, UNCTAD noted, squeezing import-dependent developing countries and low-income households hardest.
Higher fuel bills arrive alongside rising borrowing costs and portfolio flows that the agency said have roughly doubled in volatility since the conflict began. Official development assistance, a critical finance line for least developed countries and small island states, is projected to fall almost 7 percent in 2026 — its third straight annual decline.
Trade still grows, but unevenly
Global trade in goods and services is still on track to grow about 4 percent at constant prices after hitting a record $35 trillion last year, partly reflecting higher nominal prices rather than volume alone. Advanced economies account for roughly 70 percent of new investment in semiconductors, artificial intelligence and clean technology, UNCTAD said, while many developing producers of critical minerals struggle to capture more value downstream.
The report pointed to pockets of strength in developing Asia — including India, China and Indonesia — but warned that the industrial path that powered much of the region’s rise is harder for others to replicate as governments pursue strategic and national-security industrial policies.
What policymakers are weighing
UNCTAD argued that broad monetary and fiscal tightening is a weak tool against supply-driven inflation fed by energy shocks. Where feasible, domestic renewable generation can reduce exposure to imported fossil fuels; the agency cited its finding that since 2024 renewables have been cheaper than the lowest-cost new fossil plants in more than 90 percent of cases.
For finance ministers watching diesel and power bills climb into northern winter, the report’s message is blunt: the energy channel is now the dominant macro risk, and the countries with the least fiscal room are absorbing most of the pain.