As the world looks ahead to 2026, the global economy is moving into a more fragile phase. Years of rising debt, uneven recoveries and geopolitical realignment are colliding with tighter financial conditions and weakening trade. Rather than a return to high growth, the coming year is expected to be defined by volatility, policy trade-offs and growing financial fragmentation.

For low- and middle-income countries, especially across Africa and parts of Asia, the challenge will not only be how fast they grow, but how resilient their economies prove to be in a more unstable global system. Central banks face limited room to manoeuvre, governments are under pressure from high debt servicing costs, and global capital flows are becoming more selective.

Five major macroeconomic shifts are expected to shape this environment.

1. Slower global growth and weaker trade momentum

Global economic growth is projected to slow further in 2026, with international trade expanding even more slowly than output. A combination of supply-chain reshoring, industrial policy, US trade tariffs and security-driven trade restrictions is reducing the role of cross-border commerce as a driver of growth.

For export-oriented emerging economies, this means that traditional trade-led development models may deliver diminishing returns, particularly as demand from major markets such as China softens. Some African economies are still expected to grow faster than parts of Asia, but sustaining that performance will require more domestic investment, stronger productivity and rising local consumption.

At the same time, digitalisation in trade finance and logistics could lower transaction costs and help smaller firms participate more actively in global markets, partially offsetting weaker global demand.

2. Asset price risks and rising debt pressures

After years of strong asset performance driven by liquidity and inflation, financial markets appear increasingly vulnerable. Equities, private credit and real estate remain exposed to weaker corporate earnings, tighter financing conditions and fiscal stress in some countries.

Artificial intelligence continues to support parts of the global growth outlook, but this has not removed the risk of a broader market correction. For African and other LMICs, any sharp shift in global risk appetite would likely be felt through capital flows, making it harder to issue eurobonds or attract foreign investment.

As a result, domestic sources of financing such as pension funds and local institutional investors are expected to play a larger role, strengthening but also tightening the links between governments and domestic banks. Meanwhile, record debt-servicing costs suggest more restructurings may be needed in 2026.

3. Deepening geoeconomic and financial fragmentation

Geopolitics is increasingly shaping how money, trade and investment move across borders. Competing financial systems, payment networks and development finance platforms are emerging, particularly between Western economies and China-aligned blocs.

For African and Asian economies, this fragmentation creates both risks and opportunities. By diversifying financial partners and tapping a wider range of creditors, governments can reduce dependence on any single bloc. Some are also increasing local-currency borrowing, which lowers exposure to US dollar shocks and reduces vulnerability to shifts in US monetary policy.

Digital payment systems and alternative financial infrastructure may also expand, creating a more multipolar global financial landscape.

4. Persistent inflation and tougher choices for central banks

Even as global growth slows, inflation is expected to remain structurally higher than before the pandemic. Climate-related shocks, supply-side constraints and fiscal pressures are likely to keep price levels elevated.

For African central banks, this creates difficult trade-offs. Raising interest rates helps control inflation and stabilise currencies, but it also suppresses growth and increases the cost of borrowing. Looser policy, meanwhile, risks imported inflation and currency weakness.

Managing this balance will be critical in 2026, especially as exchange-rate volatility is likely to remain high in small, open economies.

5. Continued shift away from the US dollar

The US is increasingly seen as a source of global economic and political uncertainty, reinforcing the longer-term trend of dollar diversification. The dollar is expected to remain under pressure into the first half of 2026, driven by interest-rate dynamics and US trade policies aimed at shrinking the country’s external deficit.

More central banks and investors are increasing their holdings of gold and exploring alternative currency arrangements. For countries with large dollar-denominated debts, a weaker dollar provides some relief. Commodity exporters may also benefit from stronger local-currency revenues, though import-dependent economies will see fewer gains.

Together, these forces suggest that 2026 will be less about rapid expansion and more about economic resilience. For LMICs, especially in Africa, success will depend on building credible macroeconomic frameworks, deepening domestic capital markets and attracting long-term, productivity-enhancing investment.

Diversifying trade, financing sources and currency exposure carries risks, but it also offers a path to greater stability in a more fragmented global economy.