Rising Trade Barriers & Slower Growth To Pressure MSMEs In 2026: World Bank Report

New Delhi, Jan 14 (KNN) The global economy has shown stronger-than-expected resilience despite rising trade tensions, higher tariffs and policy uncertainty. However, micro, small and medium enterprises (MSMEs), particularly in developing countries, are likely to face a more difficult operating environment in 2026, according to the World Bank’s Global Economic Prospects report released in January 2026.

Rising Pressures on Small Businesses

The report notes that slower global trade and continued tariff barriers are increasing competition in export markets and raising compliance costs for MSMEs. These factors are squeezing profit margins and adding to working capital pressures, especially in emerging markets and developing economies.

Economic recovery also remains uneven. While advanced economies have largely moved beyond pre-pandemic income levels, more than a quarter of developing economies and over a third of low-income countries are still below 2019 levels, weakening demand for MSME-produced goods and services.

Limited Policy Support

Although global financial conditions have eased somewhat, high public debt and fiscal constraints in many developing countries are restricting governments’ ability to support small businesses through credit access or financial assistance, the report said.

India and South Asia Outlook

South Asia continues to be one of the fastest-growing regions, with India’s economy projected to grow by around 6.5 per cent in 2026. This growth could support MSMEs across manufacturing, services, logistics and digital sectors. 

However, the World Bank cautioned that job creation is lagging population growth, adding pressure on MSMEs to absorb a growing workforce.

Opportunities Amid Headwinds

Despite challenges, the report points to potential opportunities for MSMEs from shifts in global supply chains, including regional value chains and ‘China+1’ strategies. 

Greater use of digital and AI-enabled tools could also help improve productivity, while stronger regional and bilateral trade ties may partly offset slowing global trade.

Cautious Outlook

The World Bank said MSMEs will need to remain flexible and cautious in 2026. Firms that diversify markets, adopt digital solutions and integrate into regional supply chains are expected to be better placed to navigate a slower and more fragmented global economy.

(KNN Bureau)