The UN on Thursday said it projects the global economy will moderate slightly this year as shifting trade policies, financial risks and geopolitical tension cloud the outlook.
The world body estimated that global economic growth would decline slightly from 2.8 per cent last year to 2.7 per cent this year. It also expects growth to pick up to 2.9 per cent in 2027, still below the pre-pandemic average.
“A combination of economic, geopolitical and technological tension is reshaping the global landscape, generating new economic uncertainty and social vulnerabilities,” UN Secretary General Antonio Guterres said.
US President Donald Trump's tariff agenda sent shock waves through global trade last year, imposing a baseline universal charge on almost all trading partners and more severe so-called reciprocal tariffs on dozens of others. The UN said strong consumer spending, a front-loading of shipments, and the easing of monetary policy helped the economy remain resilient despite the tariff shock.
The US Supreme Court is set to announce a decision on the legality of Mr Trump's sweeping emergency tariffs as soon as Friday. The Trump administration would need to refund some tariffs if it were to lose the case. The White House also said it would use other statutes to impose tariffs if the Supreme Court rules against the President.
GCC boost
The UN expects an increase in oil production to boost headline growth for member countries in the Gulf Co-operation Council. Economic growth in the bloc is forecasted to rise from 3.9 per cent last year to 4.5 per cent this year.
Inflation in the Gulf is expected to remain about 2 per cent due to easing price pressure in housing, food and beverages, and other sectors.
Opec is unwinding 1.65 million barrels a day of voluntary oil cuts it had announced in April 2023, although it most recently kept oil output unchanged following the US capture of Venezuelan President Nicolas Maduro and the Trump administration announcing its intentions of controlling the South American country's oil assets.
Lower oil prices could help reduce costs for oil importers, although the broader outlook in the Middle East remains vulnerable to geopolitical risks including the situation in Gaza and the new Syrian government.
Saudi Arabia, the Arab world's largest economy, is expected to see its gross domestic product rise to 4.4 per cent this year after expanding at a 4 per cent pace last year.
The UN said it expects lower oil prices to weigh on export and fiscal revenue, while strong investment in Saudi Vision 2030 plans continues to support non-oil activity.
Saudi Arabia's Ministry of Finance last week said it projects the kingdom's fiscal deficit to narrow to 165.4 billion riyals ($44 billion) in 2026 – or 3.3 per cent of its gross domestic product – from 245 billion riyals last year. Finance Minister Mohammed Al Jadaan said at the time this deficit was “by design”, adding that the kingdom will have a deficit until 2028 while also continuing to implement gigaprojects and other programmes under its Vision 2030 agenda.
The UAE is also speeding up its own diversification effort through its investments in tourism, advanced manufacturing, technology and other non-oil industries. And a report from the S&P Global UAE Purchasing Managers' Index released last month showed the Emirates' non-oil private sector grew at its fastest pace for 11 months in November on strong market conditions.
The UN said continued investments in industries such as tourism and technology will continue to support non-oil economic activity and resilience to oil price volatility across the Gulf.
US growth
Mr Trump's tariff agenda continues to add uncertainty to the US economy, the UN said. The multilateral body expects economic activity in the US to slightly increase, from 1.9 per cent last year to 2 per cent in 2026 as some of the uncertainty eases.
US government data released last month showed the GDP grew at a 4.3 per cent annual rate in the third quarter last year due to strong government and consumer spending. That followed a 3.8 per cent growth rate in the April-June period.
The Federal Reserve last month said it expects the US GDP to rise by 2.3 per cent next year, half a percentage point higher than its September forecast. The Fed at the time said strong consumer spending and AI investment are both contributors to the upwards revision.
Treasury Secretary Scott Bessent on Thursday also pushed for more interest rate cuts, arguing they are the final piece needed to deliver stronger economic growth, CNBC reported.
The Fed cut rates in its final three meetings last year, bringing its target rate down to the range of 3.5 to 3.75 per cent.
