UNCTAD Warns of Slower Global Growth as Geopolitical Risks Supplant Trade Tensions
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The global economy is entering a more fragile period as geopolitical conflicts, rising energy costs and financial instability threaten growth and trade, according to a new report released Tuesday by the United Nations Conference on Trade and Development (UNCTAD).
While the global economy showed resilience at the start of 2026 — supported by trade, industrial production in developing countries, and investment linked to artificial intelligence — the UN agency warns the outlook is deteriorating. Geopolitical tensions have increasingly replaced trade tensions as the primary source of global instability, with energy markets, financial conditions, and major shipping routes now disrupted by conflict in the Middle East.
Growth Slows as Costs Rise
UNCTAD projects global growth will decelerate from 2.9 percent in 2025 to 2.6 percent in 2026, citing higher oil prices, transport disruptions, market volatility, and weaker investment demand. World merchandise trade growth is expected to fall sharply — from 4.7 percent in 2025 to between 1.5 and 2.5 percent this year.
Developing economies face the greatest pressure: rising fuel, food and fertilizer costs, weaker currencies, and tightening financing conditions. The report also notes that recent trade growth has been heavily concentrated in AI-linked products such as semiconductors and data-processing equipment, while broader trade activity remains subdued.
The UN agency called for stronger international cooperation, more predictable trade policies, and greater investment in renewable energy to reduce vulnerability to future shocks.
Humanitarian Costs Mount
Beyond growth figures, the humanitarian picture remains grave. In Gaza, the 2026 Flash Appeal seeking more than $4 billion to support nearly 3 million people is only 12 percent funded, with just $490 million received. The UN and its partners are supporting around 1 million meals per day in Gaza — down from 1.8 million in February — as aid agencies warn that one in five families is eating only once a day.
In South Sudan, more than 304,000 people have been displaced in Jonglei state since conflict escalated in January, particularly in the counties of Uror, Nyirol, Ayod, Duk and Akobo. Nearly 79,000 have since returned, more than 44,000 of them from Ethiopia’s Gambella region, according to UN Secretary-General Spokesperson Stéphane Dujarric.
Markets at a Crossroads
The structural shift in global risk — from trade friction to geopolitical confrontation — leaves financial markets navigating a more complex backdrop than a year ago. With AI-related investment providing the primary engine of trade growth, questions remain about whether that momentum can offset weakening demand elsewhere. The next UNCTAD update will be closely watched for signs of whether the 2.6 percent forecast needs further revision downward.