UNCTAD Lowers Global Growth Forecast to 2.6%, Warns of Widening Gap Between Nations

Geneva, Oct 9 (KUNA) -- The United Nations Conference on Trade and Development (UNCTAD) today, Friday, lowered its global growth forecast from 2.9 percent last year to 2.6 percent for 2026, warning that the artificial intelligence boom and escalating geopolitical considerations in trade and investment could deepen the gap between countries and reshape the global economic landscape.

In its 2026 Trade and Development Report, titled “The Economic Geography of Development,” issued from Geneva, UNCTAD projected that growth in developing economies would slow to 4 percent this year, down from 4.7 percent in 2025, as these economies face technological barriers and new policies that limit their ability to transition to higher value-added activities.

The report noted that global trade reached a record $35 trillion in 2025, while the rise in trade value during 2026 was primarily driven by higher prices amid a continuing energy crisis. It highlighted significant shifts in the global trade map, noting that trade between China and the United States has fallen by more than 20 percent since 2024, while East Asia has expanded its trade ties with both China and North America.

The report pointed out that export restrictions, heightened scrutiny of investments, and conditions imposed on supply chains are making it more difficult to enter strategic sectors, adding that governments are increasingly relying on industrial, trade, fiscal, and technological policies to achieve objectives related to economic and national security.

It emphasized that market access and the pursuit of higher value-added economic activities are increasingly dependent on technology, finance, and geopolitical considerations.

Speaking at a press conference in Geneva today, Pedro Manuel Moreno, Acting Secretary-General of UNCTAD, said the global economy is entering a new phase in which economic security and geopolitical influence are gaining importance, while technological and investment gains remain concentrated in a limited number of countries and companies, posing growing challenges for developing economies seeking to move into higher value-added activities. He warned that many developing countries risk remaining confined to exporting raw materials and importing technology without capturing a tangible share of the resulting value added.

In the same vein, the report projected that Asia would contribute about 59 percent of global growth in 2026, citing forecasts of 7.3 percent growth for India, 4.5 percent for China, and 5.2 percent for Indonesia. It noted that AI products have become the main driver of goods trade, cautioning that the growing trade in AI-related technologies does not necessarily translate into broad-based developmental gains.

Furthermore, the report stated that advanced economies accounted for about 70 percent of the value of new investment projects in high-value strategic sectors, including semiconductors, energy transition technologies, and AI infrastructure, based on data from 2020 to 2025. Conversely, it clarified that developing economies lead in critical minerals and strategic materials, capturing 60 percent of new foreign direct investment in this category.

The report highlighted the uneven distribution of value added in green supply chains, noting that Africa exports most of the world’s cobalt production yet retains less than one percent of the value generated by these chains. In a related development, the report clarified that the conflict in the Middle East drove up Brent crude prices from $70 to over $110 per barrel in the weeks following its outbreak, inflicting significant damage on developing economies dependent on energy imports and low-income households. It also projected a decline in official development assistance by approximately seven percentage points in 2026, representing a key financing source for the least developed countries, marking the third consecutive annual decrease.

UNCTAD called on developing countries to prioritize strategic sectors, diversify trade patterns, and accelerate the energy transition, noting that since 2024, renewable energy sources have been less expensive than the cheapest new fossil fuel-based alternative in more than 90 percent of cases. It emphasized the importance of developing local renewable energy sources to reduce reliance on imported fossil fuels, arguing that addressing energy and supply chain crises would be more effective in combating inflation than broad monetary and fiscal tightening.

The report also recommended coordinating industrial, fiscal, and technological policies, linking foreign investments to local suppliers, and increasing value added within national economies, thereby enhancing developing countries’ ability to benefit from global value chains. It underscored the importance of regional agreements in expanding markets, reducing trade costs, and strengthening regulatory cooperation, recalling the African Continental Free Trade Area, which links trade integration with economic diversification and the development of regional value chains, as well as the adoption of financial transactions in local African currencies. (End) A.M.K. / T.M.A.