Global trade and economic growth could decelerate in 2026, according to a new report from the United Nations Trade and Development agency, UNCTAD.
The forecast raises concern that the world may be entering a prolonged period of sluggish expansion, with especially sharp consequences for poorer and developing economies like Nigeria.
UNCTAD now projects that world economic growth will ease to 2.6 percent in 2025 and 2026, down from 2.9 percent in 2024.
Previously, in April 2025, the agency had warned of a potential 2.3 percent growth for 2025 amid rising global uncertainties.
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Early in 2025, global trade enjoyed a temporary boost, rising by about 4 percent. This rebound was driven in part by companies rushing to import goods ahead of new tariff changes, and by surging demand for digital-economy and artificial-intelligence-related–related goods and services.
But UNCTAD’s analysis shows that, once those temporary drivers fade, “underlying” trade growth is already slipping to just 2.5–3 percent, and signs suggest the slide will continue into 2026.
Capital flows
A key finding of the 2025 report is that financial conditions, not just traditional supply chains, now play a major role in shaping global trade.
Over 90 percent of global trade now depends on bank financing, payment systems, currency markets, and global capital flows.
That dependency means trade volumes are increasingly vulnerable to fluctuations in interest rates, shifts in investor sentiment, and volatility in global financial markets, a marked change from past decades when trade largely followed real economic demand.
For commodity markets, especially food commodities, financial income now makes up a growing share of revenue for major trading companies, showing just how deeply financialization has penetrated trade.
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The slower growth and increasing financial volatility pose particular risks for developing and low-income countries. Although the “global South” now accounts for more than 40 percent of world output, nearly half of global merchandise trade, and over half of global investment inflows, these economies hold only about 25 percent of global financial market value.
Because domestic financial markets in many developing economies remain shallow, these countries often rely heavily on external borrowing, frequently at significantly higher interest rates (7–11 percent) than those in advanced economies (1–4 percent).
Such conditions make them more vulnerable to swings in capital flows, rising climate-related financial risks, and abrupt shifts in global liquidity or investor sentiment. That could slow long-term investment, hinder debt sustainability, and undermine growth.
UNCTAD’s report calls for structural reforms to better align trade, finance, and sustainable development.
Some of its key recommendations include updating trade rules and agreements to reflect modern realities, including digital trade, services, and climate-sensitive industries. This also includes reforming the international monetary system to reduce harmful volatility in currency exchange rates and capital flows.
In addition, countries like Nigeria must strengthen domestic and regional capital markets to expand access to affordable, long-term financing, especially for small businesses and export-dependent firms.
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For global trade, the trend suggests prolonged periods of sluggish trade growth, slower growth of global supply chains, and increased vulnerability to financial-market volatility, even if demand recovers.
According to the UN, economies that rely heavily on external borrowing, commodity exports, or import-dependent supply chains could face rising costs, debt stress, and shrinking access to affordable credit.
It says policy makers must strengthen domestic financial systems, expand regional and South–South trade, boost local capital markets, and reduce reliance on volatile external financing
“Trade is not just a chain of suppliers. It’s also a chain of credit lines, payment systems, currency markets and capital flows, and these financial channels increasingly determine the direction of global trade,” the report said.
