Source: United Nations Conference on Trade and Development (UNCTAD) | Geneva, 2026

Overview

The Trade and Development Foresights 2026 is UNCTAD’s latest update on the global economic outlook, building on its flagship Trade and Development Report 2025. The report assesses how a combination of geopolitical escalation, energy market shocks, and shifting trade policies is reshaping growth prospects for both developed and developing economies, with particular implications for Africa and the global South.

The Global Economy: A Firm Start, A Fragile Outlook

The global economy entered 2026 on relatively solid ground. Buoyed by dynamism in trade and technology sectors, the global economy grew 2.9 per cent in 2025. This resilience was driven by robust industrial output in developing countries, particularly technology-intensive manufacturing linked to artificial intelligence in Asia, which outpaced performance in advanced economies.

However, conditions deteriorated sharply from late February 2026 onwards. Since the end of February 2026, the recovery has faced a set of disruptions stemming from military escalation in the Middle East. In the near-term, the economic consequences of the conflict centre on energy markets and shipping routes. In the longer run, a protracted escalation is likely to entail system-wide effects on international trade, food systems and financial markets.

As a result, the global economy is expected to grow 2.6 per cent in 2026, 0.3 percentage points lower than in 2025.

The Shift from Trade Policy to Geopolitical Risk

One of the report’s central findings is a fundamental change in global risk. Whereas 2025 was shaped by trade policy uncertainty, early 2026 has been dominated by heightened geopolitical risks. These tensions trigger additional transmission mechanisms within a global economy marked by evolving trade-finance interdependencies.

This is compounded by a longer-term structural problem: the ongoing conflict adds to global structural weaknesses. It intensifies the longer-term trend of rising conflicts globally, many of which undermine the growth prospects of developing countries.

The report identifies three resulting concerns: worsening economic fragilities linked to slower growth and rising inequality; mounting investment uncertainty, with developing countries facing renewed financial outflows; and the risk of a cascading crisis if the conflict persists and deepens.

Energy Markets: A Central Shock

The Middle East conflict triggered a sharp and immediate energy market shock. In early March 2026, the outbreak of the conflict in the Middle East affected the global economy through sharp swings in international energy prices, with oil surging more than 60 per cent and gas more than doubling in a matter of days.

The consequences are uneven across nations. While net oil exporters may see short-term revenue gains, the broader picture is concerning. Developing countries face more serious consequences, as their energy imports are more inelastic, particularly for those with significant imports of fuels, food and fertilisers.

As of early April 2026, numerous developing countries, including Bangladesh, Brazil, Egypt, Ethiopia, India, Indonesia, Mexico, Pakistan, the Philippines, Sri Lanka, Thailand and Viet Nam, had introduced price controls, supply-stretching measures, or fuel subsidy increases to cushion the blow, often at high fiscal cost.

Financial Markets Under Pressure

The conflict has also upended global financial dynamics in unexpected ways. Rather than flowing into traditional safe-haven assets such as long-term sovereign bonds, investors appear to demand higher yields for holding these bonds, despite growing demand for dollars. Consequently, long-term sovereign bond yields have increased, while the dollar has strengthened. Gold prices declined following the outbreak of the conflict, an atypical pattern that signals deeper investor uncertainty.

For developing countries, the financial fallout has been severe. While many developing countries proved attractive to international investors in 2025, they now face a renewed threat of capital outflows as investors seek safety amid geopolitical uncertainties.

Currency depreciations were widespread across the global South, most pronounced in the Americas, followed by Africa and Asia. The start of the Middle East conflict triggered a sell-off of developing countries’ assets, with equity markets of emerging markets sliding by more than 12 per cent between 28 February and 29 March. External sovereign bond yields for both emerging and frontier market economies reversed the declining trend that had been in place since mid-2025.

Frontier-market economies are considered especially vulnerable in a prolonged conflict scenario, given their shallower and less liquid domestic capital markets, which amplify the impact of foreign investor sell-offs.

World Merchandise Trade: Early Strength, Fading Momentum

Trade started 2026 strongly, with Chinese exports expanding more than 20 per cent in dollar terms in January–February compared to the same period in 2025. Global air cargo grew 11.6 per cent in February year-on-year, and seaborne cargo expanded 5.3 per cent overall.

However, this strength was heavily concentrated in one sector. The recent expansion has been relatively concentrated on specific products, particularly AI-related goods like servers, high-performance computing equipment, semiconductors, and components associated with service automation and data centre investment.

The dynamism of AI-related products contrasts with more traditional sectors, such as basic consumer goods, textiles, and some intermediate inputs, which recorded modest gains. This directly affects the West African cotton and textile sector, which is part of the broader group of traditional sectors seeing limited growth.

The Strait of Hormuz disruptions hit maritime energy transport hardest, with crude and LNG carriers bearing the brunt of higher risk premia and reduced volumes. While container shipping faces fewer direct risks from the conflict than other maritime sectors, it is not insulated from disruptions or rising costs.

Looking ahead, growth of world merchandise trade, in real terms, is expected to slow from 4.7 per cent in 2025 to 1.5–2.5 per cent in 2026.

Read More……………