As the global economy slows amid trade tensions, fiscal strains and policy uncertainty, East and South Asia are expected to remain key growth engines, according to the United Nations’ World Economic Situation and Prospects (WESP) 2026. While global output is forecast to expand by just 2.7 per cent in 2026, well below the pre-pandemic average of 3.2 per cent, South Asia’s GDP is projected to grow by 5.6 per cent and East Asia by 4.4 per cent, underscoring the region’s relative resilience.
The report, released on January 8, said supportive monetary and fiscal policies, strong domestic demand and public investment are helping Asian economies weather rising trade barriers, elevated debt and geopolitical uncertainty that continue to cloud the global outlook.
“A combination of economic, geopolitical and technological tensions is reshaping the global landscape, generating new economic uncertainty and social vulnerabilities,” United Nations Secretary-General António Guterres said. “Many developing economies continue to struggle and, as a result, progress towards the Sustainable Development Goals remains distant for much of the world.”
India anchors South Asian growth
South Asia is projected to grow by 5.6 per cent in 2026 and 5.9 per cent in 2027, following estimated growth of 5.9 per cent in 2025, making it one of the fastest-growing regions globally. India, the region’s largest economy, is expected to expand by 6.6 per cent in 2026, easing from 7.4 per cent in 2025 but remaining far above the global average.
The UN said resilient household consumption, strong public investment and lower interest rates should underpin India’s growth. While higher United States tariffs may affect some product categories, “key export segments are likely to remain largely unaffected,” with strong demand from other major markets providing a buffer.
Inflation across South Asia fell sharply in 2025, enabling most central banks to ease policy, though average consumer price inflation is projected to edge up to 8.7 per cent in 2026, masking wide differences across countries.
East Asia moderates as trade boost fades
In East Asia, growth is expected to moderate as the temporary boost from front-loading exports ahead of US tariff hikes fades. Regional GDP growth is forecast at 4.4 per cent in both 2026 and 2027, down from 4.9 per cent in 2025, though domestic demand is expected to remain resilient, supported by accommodative policies.
China’s economy is projected to grow by 4.6 per cent in 2026 and 4.5 per cent in 2027, following 4.9 per cent growth in 2025. A temporary easing of trade tensions with the US, including targeted tariff reductions and a one-year truce, has helped stabilise confidence, while policy support is expected to cushion external headwinds.
Risks remain tilted to the downside
Despite the relatively strong outlook, the UN cautioned that risks to East and South Asia remain skewed to the downside. Trade policy uncertainty, a potential slowdown in major economies—including the US, China and the European Union—and high public debt levels could weigh on exports, investment and tourism.
In South Asia, elevated government debt limits fiscal space and constrains the ability to provide countercyclical support, making the region vulnerable to external shocks.
Fragile global backdrop
Globally, the economy showed unexpected resilience in 2025 despite sharp US tariff hikes, supported by solid consumer spending and easing inflation. But the UN warned that subdued investment, high debt and weakening multilateral cooperation could push the world into a prolonged period of slower growth.
International trade grew by 3.8 per cent in 2025, but is projected to slow to 2.2 per cent in 2026 as tariff effects become more entrenched. Inflation is expected to ease further to 3.1 per cent in 2026, though high prices continue to strain household budgets.
“Even as inflation recedes, high and still rising prices continue to erode the purchasing power of the most vulnerable,” said Li Junhua, UN Under-Secretary-General for Economic and Social Affairs.
Call for renewed cooperation
The report stressed that sustaining growth amid trade realignments, climate shocks and persistent price pressures will require renewed multilateral cooperation. It highlighted the Sevilla Commitment—adopted at the Fourth International Conference on Financing for Development—as a roadmap to reform the global financial architecture, scale up concessional and climate finance, and address debt vulnerabilities.
Without stronger global coordination, the UN warned, even relatively resilient regions such as East and South Asia could find it harder to sustain momentum in an increasingly fragmented global economy.
