New Delhi [India], January 8 : Economic prospects in East and South Asian countries are expected to remain solid despite elevated policy uncertainty, rising trade barriers, and lingering debt vulnerabilities, according to the World Economic Situation and Prospects (WESP) 2026, released by the United Nations on Thursday.
Growth in East Asia is projected to moderate from 4.9 per cent in 2025 to 4.4 per cent in both 2026 and 2027.
South Asia's GDP is expected to expand by 5.6 per cent in 2026 and 5.9 per cent in 2027, following estimated growth of 5.9 per cent in 2025, according to the United Nations report.
Global output is forecast to grow by 2.7 per cent in 2026, slightly below the 2.8 per cent estimated for 2025 and well below the pre-pandemic average of 3.2 per cent.
During 2025, unexpected resilience to sharp increases in US tariffs, supported by solid consumer spending and easing inflation, helped sustain growth.
However, underlying weaknesses persist. Subdued investment and limited fiscal space are weighing on economic activity, raising the prospect that the world economy could settle into a persistently slower growth path than in the pre-pandemic era.
"A combination of economic, geopolitical and technological tensions is reshaping the global landscape, generating new economic uncertainty and social vulnerabilities," said United Nations Secretary-General Antonio Guterres. "Many developing economies continue to struggle and, as a result, progress towards the Sustainable Development Goals remains distant for much of the world."
East Asia's growth is expected to moderate in the near term.
During the first three quarters of 2025, front-loading of shipments ahead of US tariffs boosted exports, while private consumption was supported by steady labour markets and ongoing disinflation, it said.
Looking ahead, the temporary boost from front-loading will fade, but domestic demand is expected to remain resilient, underpinned by supportive monetary and fiscal measures.
Regional headline inflation is projected at 1.1 per cent in 2026, edging up from an estimated 0.5 per cent in 2025.
Country wise, China's economy is projected to expand by 4.6 per cent in 2026 and 4.5 per cent in 2027, following estimated growth of 4.9 per cent in 2025.
A temporary easing of trade tensions with the United States, including targeted tariff reductions and a one-year trade truce, has helped stabilise business confidence.
Meanwhile, supportive monetary and fiscal policies are expected to sustain domestic demand and cushion external headwinds.
South Asia's economic outlook remains robust, largely due to strong private consumption and public investment.
Inflation across the region declined markedly in 2025, with rates in most economies at or below central bank targets and long-term averages.
According to the UN report, average consumer price inflation is projected to edge up from an estimated 8.3 per cent in 2025 to 8.7 per cent in 2026, ranging from 3.2 per cent in Nepal and 4.1 per cent in India to 35.4 per cent in Iran.
In India, growth is projected to moderate from an estimated 7.4 per cent in 2025 to 6.6 per cent in 2026. Resilient household spending, strong public investment, and lower interest rates are expected to underpin economic activity.
While higher US tariffs may weigh on select product categories, key export segments are likely to remain largely unaffected. Moreover, strong demand from other major markets is expected to partially offset the impact.
Downside risks cloud the outlook. Risks to the outlook for East and South Asia remain tilted to the downside.
Trade policy uncertainty is a key near-term risk, even though recent US tariff increases on Asian economies were smaller than initially anticipated and some trade agreements have been reached.
A slowdown in major economies, including China, the European Union, and the United States, could further weigh on regional merchandise trade, investment flows, and tourism activity.
Another important downside risk relates to fragile fiscal positions in several economies, where high public debt limits policy space. In South Asia, in particular, elevated government debt constrains the ability to provide countercyclical support and respond effectively to external shocks.
Most central banks across East and South Asia eased monetary policy in 2025 as inflation declined and the US Federal Reserve lowered interest rates.
Monetary easing is expected to continue in 2026, though the pace and extent will vary across countries, the UN report has asserted.
The report underscores that navigating an era of trade realignments, persistent price pressures, and climate-related shocks will demand deeper global coordination and decisive collective action at a time when geopolitical tensions are rising, policies are becoming more inward-looking, and impetus towards multilateral solutions is weakening.
Sustained progress will depend on rebuilding trust, strengthening predictability, and renewing the commitment to an open, rules-based multilateral trading system, the UN report noted.