OUTLOOK AND RISKS ON GLOBAL TRADE AND POLICY CHOICES

The World Bank has just published the January 2026 issue of the Global Economic Prospects (GEP). One of the main conclusions of the report is that the global economy is proving much more resilient than we expected in the first half of 2025 when the introduction of steep trade tariffs increases, and high policy uncertainty brought a sense of pessimism among the economics profession. Indeed, global Gross Domestic Product (GDP) growth is expected to come in at about 2.7 percent in 2025. .4 percentage points above our own June 2025 projection, and exactly the same projection we had in early 2025. This is good news. But since we are sure that some readers will be thinking of Professor Paul Samuelson comical remark that “economists have predicted nine of the last five recessions” it may be worth reflecting about what we did get wrong and where we think we are still right regarding the impact that trade disruptions will have on growth.

One area where admittedly our projections were off base was anticipating world trade volume growth. In January 2025, our projection was that global trade would grow by 3.1 percent in 2025. In 2025, we adjusted down the projection to 1.8 percent (something that in turn dragged down global growth). Eventually, trade growth in 2025 will likely be around 3.4 percent, even higher than what we were anticipating one year ago.

Why was this? In part because of frontloading of imports and exports ahead of policy changes to avoid higher tariffs. And in part because of the capacity of the private sector to resort to supplychain rerouting. Seeing this market flexibility is welcomed. But it also implies that to some extent the trade growth observed this year is somewhat artificial because markets anticipated the new policies and now will need to adjust. Given our miss in June last year, claiming that we expect world trade volumes to grow in 2026 by 2.2 percent (1 full percentage point lower than what we expected in January 2025) and global growth to decelerate to 2.6 percent may not carry lots of credibility. But when we look at one of the most recent examples of the economic impact of trade disruptions (i.e. Brexit) there are reasons to be less optimistic than what is suggested by the economic figures of this year. A recent academic paper by Bloom et al. concludes that (i) the losses from Brexit had emerged gradually; (ii) economists were right on the magnitude of the impact but wrong on the timing as the effects took longer to materialize; and (iii) Brexit has had large and persistent effects on the UK economy with per capita GDP estimated to be 6-8 percent lower than it would have been without Brexit; investment 12-18 percent lower; and employment and productivity 3-4 percent lower. What is then our advice for Türkiye? Türkiye is moving fast to achieve high income status and the GDP growth rate expected in 2025 (3.5 percent) and our projections for 2026 and 2027 (3.7 and 4.4 percent respectively) will help solidify this trajectory. Yet, this is below the growth rates experienced over the first two decades of this century when the country had annual growth rates above 5 percent on average. Our analysis at the World Bank suggests that it will be important to focus on ways to enhance productivity to return that higher sustained growth rates. Current efforts to improve the transport infrastructure (and hence reduce logistics costs) as well as advance with the energy transition (and hence be able to reduce energy and production costs) are key. But we should add that the international evidence also links deeper trade integration to higher firmlevel productivity via competition, scale, and knowledge spillovers. So, for countries like Türkiye, we would recommend policies aiming at lowering trade costs (customs modernization; logistics and servicesmarket reforms), diversifying partners and inputs, and attracting FDI to support upgrading and resilience. Given Türkiye’s large tradables base, these levers—alongside macro stability—are central to sustaining competitiveness and productivity gains. It is also important to limit fragmentation risks by reinforcing rulesbased trade, improving the investment climate, and strengthening human capital to move up value chains—priorities directly relevant for Türkiye’s exporters and suppliers.