World Bank
World Bank Projections: Emerging vs. Big Economies of Asia
The World Bank’s June 2026 assessment carries a phrase that should stop any investor mid-scroll: a “lost decade” of development for many emerging markets.
Global growth is projected to slow from 2.9% in 2025 to 2.5% in 2026 — the lowest rate since the COVID-19 pandemic — amid weaker prospects for energy-importing economies and those directly affected by hostilities.
Within that aggregate, Asia is splitting into two distinct groups. Understanding which side an economy falls on is now the primary emerging-market allocation decision.
Key Takeaways
- Global growth: 2.5% in 2026, firming in 2027–28 as energy supplies recover and trade strengthens.
- The revision was brutal. January 2026 projected 2.6% with an upward revision; June cut it.
- India remains the outlier. FY2026-27 growth of 6.6%, rebounding to 7.2% in FY2027-28.
- China decelerates. Growth slowing to 4.4% in 2026 from 4.9%.
- The 2020s are on track to be the weakest decade for global growth since the 1960s.
The Two Reports That Define 2026
The World Bank publishes Global Economic Prospects twice a year, and the gap between the January and June 2026 editions is the story.
January: Cautious Optimism
The January report described a global economy proving more resilient than anticipated despite persistent trade tensions and policy uncertainty, with growth easing to 2.6% in 2026 before rising to 2.7% in 2027 — an upward revision from the previous June forecast.
About two-thirds of that upgrade came from the United States alone.
June: The Energy Shock
By June, the Middle East conflict had driven sharp energy price increases and the projection fell to 2.5%, with emerging market and developing economies facing the weakest per capita income growth since the pandemic.
The Bank explicitly notes that the conflict’s impact on global trade has been partly offset by robust AI-related investment, while consensus inflation expectations picked up notably following the energy price surge. Local-currency bond yields and external bond spreads remained higher in commodity importers.
That last sentence is the whole emerging-market thesis in one line: commodity importers are paying more to borrow at exactly the moment they need to borrow more.
Asia’s Two Tiers
| Economy | Projection | Position |
|---|---|---|
| India | 6.6% FY26-27, 7.2% FY27-28 | Domestic-demand-led, upgraded |
| China | 4.4% in 2026 (from 4.9%) | Export-supported, stimulus-dependent |
| EMDEs (all) | 4.0% in 2026 (from 4.2%) | Slowing |
| EMDEs excl. China | 3.7% in 2026 | Flat versus 2025 |
| United States | 2.2% in 2026 | Tax-incentive supported |
The EMDE-excluding-China figure of 3.7%, unchanged from 2025, is the number that matters most and gets quoted least. Strip out China, and the developing world is not slowing — it simply is not accelerating. Stagnation at a level too low to close income gaps.
The India Case
India stands apart in the June projections. Growth is projected to moderate to 6.6% in FY2026-27 — a 0.1 percentage point upgrade relative to January — before rebounding to 7.2% in FY2027-28, a 0.6 point upgrade.
The moderation reflects private demand cooling under input cost pressures. The rebound reflects structural factors:
- Trade agreements. Implementation of major FTAs with the EU, UK and Australia is described as crucial to offsetting cooling merchandise demand from traditional Western markets.
- FDI sustainability. Trade agreements and structural business reforms are expected to sustainably support inflows across the forecast horizon.
- Fiscal trade-offs. Lower fuel taxes and GST reforms temporarily erode the revenue base, requiring a shift toward slower public capex growth and current spending cuts to avoid deficit spikes.
That last point is the underappreciated risk. India’s growth upgrade is partly financed by revenue concessions that must eventually be reversed or absorbed.
The China Case
China’s projected slowdown to 4.4% in 2026 came with an upward revision of four-tenths of a percentage point from the previous June forecast, attributed to fiscal stimulus and increased exports to non-US markets.
That revision has since been validated by trade data. The question for 2027 is whether export strength can persist if global demand slows to the 2.5% pace the Bank projects.
China’s position is structurally different from India’s: externally driven where India is domestically driven, stimulus-dependent where India is reform-dependent.
What the “Lost Decade” Framing Actually Means
The World Bank’s language is deliberately stark. If current forecasts hold, the 2020s are on track to be the weakest decade for global growth since the 1960s and too low to avert stagnation and joblessness in emerging market and developing countries.
The distributional evidence is concrete: at the end of 2025, nearly all advanced economies enjoyed per capita incomes exceeding their 2019 levels, but about one in four developing economies had lower per capita incomes than before the pandemic.
Chief Economist Indermit Gill framed the underlying tension precisely: the global economy has become less capable of generating growth while appearing more resilient to policy uncertainty — a divergence he warned cannot persist without fracturing public finance and credit markets.
Investment Implications by Tier
Tier 1 — Energy importers in the technology value chain. India, Vietnam, Malaysia, Taiwan, Korea. AI-related export revenues offset higher energy costs. Currency and equity performance has held up.
Tier 2 — Energy exporters outside the conflict zone. Gulf states excluding those directly affected, parts of Africa and Latin America. Favourable terms of trade, fiscal space expanding.
Tier 3 — Energy importers outside the technology chain. Pakistan, Bangladesh, Sri Lanka, Kenya, much of Sub-Saharan Africa. Higher import bills, higher borrowing costs, no offsetting export windfall.
Tier 3 is where sovereign stress concentrates. Higher local-currency bond yields and wider external spreads in commodity importers mean refinancing costs rise as fiscal positions deteriorate.
What This Means for the Global Market in 2027
The 2027 recovery is conditional on two assumptions. Activity is expected to firm in 2027–28 as energy supplies recover and trade strengthens. Both require the conflict to de-escalate. Neither is guaranteed.
AI adoption is the identified upside. The Bank names artificial intelligence adoption, clean energy investment and regional trade agreements as potential long-term recovery catalysts. Only the first is currently delivering at scale.
Sovereign debt is the accumulating risk. Elevated yields in commodity importers compound every year they persist. A 2027 refinancing wave at current spreads would strain multiple frontier sovereigns simultaneously.
Regional trade agreements are the underrated policy lever. India’s FTA implementation is the clearest test case. If it delivers the projected FDI and export offset, it becomes a template for the rest of emerging Asia.
Compare the IMF and World Bank carefully. The Fund projects 3.0% for 2026; the Bank projects 2.5%. The difference is methodological — PPP versus market exchange rate weighting — not a disagreement about the world.
Frequently Asked Questions
What is the World Bank’s global growth forecast for 2026?
The June 2026 Global Economic Prospects projects global growth slowing to 2.5% in 2026, down from 2.9% in 2025 — the lowest rate since the pandemic.
What is India’s projected GDP growth?
India is projected to grow 6.6% in FY2026-27 before rebounding to 7.2% in FY2027-28, both upgrades relative to January 2026 projections.
Why are World Bank and IMF forecasts different?
The World Bank weights using market exchange rates while the IMF uses purchasing-power-parity weights, which gives more weight to faster-growing emerging economies.
What does “lost decade” mean for emerging markets?
The Bank warns the 2020s could be the weakest decade for global growth since the 1960s, with roughly one in four developing economies having lower per capita incomes at end-2025 than in 2019.