The global economy may have moved beyond the immediate disruptions of the pandemic, but for nearly half of the developing world, recovery remains elusive.
According to the World Bank’s June 2026 Global Economic Prospects report, almost 50 percent of emerging market and developing economies (EMDEs) have failed to narrow the income gap with advanced economies since 2019. Instead of converging toward higher living standards, many countries are experiencing stagnation, rising debt burdens, weaker investment, and slowing productivity growth.
The findings raise concerns that much of the developing world is entering what economists traditionally describe as a “lost decade” — a prolonged period of weak growth in which living standards stagnate and economic progress slows dramatically.
The End of Economic Convergence?
For decades, the dominant assumption in global development was that poorer nations would gradually catch up with wealthier economies through trade, investment, industrialization, and technological adoption.
That assumption is now under significant strain.
The World Bank projects global economic growth to slow to 2.5 percent in 2026, down from 2.9 percent in 2025, reflecting mounting geopolitical tensions, trade fragmentation, and weakening investment flows.
While advanced economies are expected to maintain modest growth of between 1.5 percent and 1.8 percent annually through 2028, developing economies are losing momentum.
Growth across emerging market and developing economies is forecast to slow to 3.6 percent in 2026, representing a 0.4 percentage-point downgrade from projections issued just six months earlier.
More concerning is what happens when China and India are excluded from the calculations.
For the rest of the developing world, per capita income growth is expected to fall to just 1.3 percent in 2026. In fragile and conflict-affected economies, per capita income growth is projected at zero percent, effectively meaning living standards are no longer improving.
The result is a widening development divide.
By 2028, large parts of Sub-Saharan Africa, the Middle East, and Latin America are expected to remain further behind advanced economies than they were before the pandemic in 2019.
Debt Pressures Are Becoming a Structural Threat
A major factor behind the slowdown is the growing burden of sovereign debt.
During the era of ultra-low global interest rates that followed the 2008 financial crisis, many developing economies borrowed heavily to finance infrastructure, social spending, and economic stimulus programmes.
Today, that borrowing environment has changed dramatically.
Higher global interest rates, persistent inflation concerns, and geopolitical uncertainty have pushed borrowing costs upward, particularly for frontier and lower-income economies.
The World Bank notes that the relationship between public debt and borrowing costs has become increasingly severe. As debt levels rise, markets demand significantly higher risk premiums, creating a vicious cycle in which governments must devote larger portions of national budgets to debt servicing.
This reduces fiscal space for critical investments in education, healthcare, transport infrastructure, and industrial development.
For many countries, economic management is increasingly focused on meeting debt obligations rather than financing future growth.
Development Financing Is Drying Up
Compounding the challenge is the sharp decline in international development support.
The report shows that Net Official Development Assistance (ODA) fell by 23 percent in real terms during 2025, marking the largest annual decline on record.
For many low-income countries, development assistance has historically served as an important buffer during periods of economic stress.
The decline means governments are now confronting weaker growth, higher debt costs, and reduced external support simultaneously.
This creates additional pressure on already strained public finances and limits the ability of governments to invest in long-term development priorities.
A Demographic Challenge Unlike Any Before
Perhaps the most consequential finding in the report concerns demographics.
Over the next decade, approximately 1.2 billion young people across developing economies will reach working age.
Under favorable economic conditions, such a demographic surge could generate substantial growth through increased productivity, entrepreneurship, and consumption.
However, the World Bank warns that current growth rates are insufficient to absorb such a large influx of workers.
Private investment growth across developing economies has weakened considerably since the early 2000s due to infrastructure deficits, policy uncertainty, limited access to finance, and weaker investor confidence.
Without significant increases in private-sector investment, many countries could face rising unemployment, underemployment, and social instability.
The challenge is particularly acute in regions with rapidly growing populations, including Sub-Saharan Africa.
The Emerging AI Divide
Another risk highlighted by the report is the uneven adoption of artificial intelligence and digital technologies.
While advanced economies are increasingly deploying generative AI to improve productivity, automate routine tasks, and strengthen competitiveness, many developing economies remain constrained by inadequate digital infrastructure, limited technical skills, and unreliable electricity access.
This raises the possibility of a new form of economic divergence.
Rather than helping poorer countries leapfrog traditional development stages, the AI revolution could widen existing productivity gaps if adoption remains concentrated in wealthier economies.
Without targeted investments in digital infrastructure and human capital, developing countries risk becoming increasingly disconnected from emerging global value chains.
What Must Change
The World Bank argues that short-term policy measures alone will not be sufficient to reverse current trends.
Instead, governments must pursue structural reforms aimed at strengthening fiscal resilience, improving debt management, expanding domestic revenue collection, and creating conditions that encourage private investment.
Key recommendations include establishing credible fiscal frameworks, accelerating infrastructure development, improving governance standards, and enhancing access to finance for businesses.
At the international level, the report calls for faster implementation of debt restructuring mechanisms, including initiatives under the G20 Common Framework, alongside innovative financing tools such as debt-for-development swaps.
Such measures, the World Bank argues, are necessary to restore fiscal sustainability and unlock resources for long-term growth.
A Defining Economic Moment
The central message emerging from the World Bank’s latest assessment is stark: the challenge facing developing economies is no longer a temporary post-pandemic slowdown.
It is becoming a structural growth crisis.
Nearly half of the world’s developing economies are no longer catching up with richer nations. Many are struggling with slowing growth, rising debt burdens, declining development assistance, and mounting demographic pressures.
If current trends persist, the 2020s could become a genuine lost decade for billions of people across the developing world.
The question facing policymakers is no longer whether the global growth model is under strain. It is whether governments and international institutions can act quickly enough to prevent a temporary setback from becoming a permanent divide.
