Knowledge Nugget: How the UN’s World Economic Situation and Prospects Report 2026 is important for your UPSC exam

Take a look at the essential concepts, terms, quotes, or phenomena every day and brush up your knowledge. Here’s your UPSC current affairs knowledge nugget on the latest UN Report for today.

(Relevance: Questions have been asked in the exam on UN reports. These reports are important as they highlight the state of the global economy, factors that require global attention, and issues that should show up in the agenda of every country. Therefore, knowing about the key highlights of the report is important from your exam perspective.)

The global economy is forecast to grow by 2.7 per cent in 2026, slightly below the 2.8 per cent estimated for 2025, 40 bps faster than previously anticipated, according to the World Economic Situation and Prospects 2026, released by the United Nations on 8th January 2025. Despite new trade frictions created by United States tariffs, global economic activity proved resilient, notes the report.

The report is prepared by the UN’s Department of Economic and Social Affairs (DESA) in partnership with the United Nations Conference on Trade and Development (UNCTAD) and the five United Nations regional commissions.

1. According to the UN report, the increase in global military expenditure in 2024 to $2.7 trillion reflects “the steepest annual increase since at least 1988”. The rise has been driven by the world’s 10 largest spenders, which make up nearly 75 per cent of the total, the UN said.

2. This defence expenditure jump, the organisation warned, threatens to divert money from long-term investment in human capital, infrastructure, and development cooperation with vulnerable economies.

3. While global growth is seen edging up to 2.9 per cent in 2027, the UN report warned it would still be lower than the 3.2 per cent average annual growth seen during 2010-2019. With structural headwinds like subdued investment, high debt levels, and limited fiscal space limiting productive capacity and holding back potential growth in many countries, the world could “settle into a persistently slower growth path than in the pre-pandemic era”. And while artificial intelligence could help lift productivity growth, uncertainty remains about the scale, timing, and distribution of the potential gains from these advances.

4. In terms of growth, the UN upgraded its growth forecast for India for the 2026 calendar year by 20 basis points (bps) to 6.6 per cent, with growth seen picking up pace slightly in 2027 to 6.7 per cent. For calendar year 2025, the UN has estimated India’s growth rate at 7.4 per cent — the same as the Indian government’s first advance estimate for the fiscal year ending March 2026.

5. Growth in India is seen as supported by “resilient consumption and strong public investment”, which the UN expects to “largely offset” the hit from the US tariffs. “Recent tax reforms and monetary easing should provide additional near-term support,” the global organisation added.

6. However, the report warns that India’s export performance in 2026 could be impacted if the current rates of high United States tariffs persist, as the United States market accounts for about 18 per cent of total exports from India.

7. As many developing countries continue to struggle with elevated debt burdens, limited fiscal space and tepid growth, United Nations Secretary-General António Guterres warns that in this case, the progress towards the Sustainable Development Goals remains distant. He also highlighted the important steps that were taken in 2025 by the international community to renew solidarity and strengthen collective action.

8. These collective actions include the Sevilla Commitment; the World Social Summit that reaffirmed that jobs, equality and human rights are the foundation of peace and prosperity; and COP30, which committed to strengthened global climate cooperation, advancing commitments on finance, adaptation and support for those most at risk.

1. The 4th International Conference on Financing for Development (FfD4) was held from 30 June – 3 July in Seville, Spain. A Sevilla Commitment was adopted which laid down a path to close the $4 trillion annual SDG financing gap in developing countries. However, the USA, one of the largest economies, skipped the Conference.

2. Financing for development (FfD) is an ongoing process to align financial flows and policies with economic, social, and environmental priorities. In 1997, the Agenda for Development was adopted by the UN General Assembly (UNGA), which called for consideration of holding an international conference on FfD.

These are the 17 Sustainable Development Goals to be achieved by 2030. (Source: UN)

3. Many countries face escalating debt burdens, declining investments, decreasing international aid, and increasing trade barriers. The Conference is seen as an opportunity to close the staggering $4 trillion annual financing gap, promoting development, bringing millions of people out of poverty, and helping achieve the UN’s Sustainable Development Goals, which are currently lagging.

4. Building on the 2015 Addis Ababa Action Agenda, the Sevilla Commitment reaffirms adherence to realizing sustainable development, including effectively implementing the 2030 Agenda for Sustainable Development and its 17 Sustainable Development Goals and upholding all principles enshrined in it.

5. With the approaching deadline of SDGs, the Sevilla Commitment charts a path on three fronts: catalyzing investment at scale for sustainable development, addressing the debt and development crisis, and reforming the international financial architecture.

🚨 Click Here to read the UPSC Essentials magazine for December 2025. Share your views and suggestions in the comment box or at manas.srivastava@indianexpress.com🚨