Economic developments and outlook
The financial year unfolded against a global backdrop that proved more resilient than feared. Growth held up amidst technology-driven tailwinds, the disinflation under way since early 2024 broadly continued, and a late-year geopolitical shock in the Middle East tested but did not derail the trend. Whilst the shocks reverberated through the global markets, the East African economies sustained their recovery. Inflation stayed largely contained, currencies were notably steadier than in prior years, and both Tanzania and Uganda navigated general elections within the period. Looking ahead, the balance between an accelerating technology cycle and persistent geopolitical conflict will continue to shape the global outlook and, through it, the prospects for East African markets and the Fund’s portfolio.
Global output growth
Global inflation
United States growth
Emerging markets growth
The global economy proved more resilient than feared through FY2025/26, absorbing a late-year energy shock without abandoning its disinflationary path. Two opposing forces defined the year: a technology cycle that supported growth and geopolitical conflict that pushed up energy prices. The balance between them held the world economy on a steady, if unspectacular, course.
Global output expanded by an estimated 3.5% in calendar year 2025, little changed from the prior year. World consumer price inflation eased to 4.1% as the disinflation under way since early 2024 broadly continued. Growth, however, remained uneven across regions: the United States grew by 2.1%, the Euro area by 1.4%, while emerging and developing economies expanded by 4.5%, with China holding at 5.0%.
Much of that emerging-market strength was concentrated in economies plugged into the global technology cycle. Across East Asia, for example, accelerating investment in and adoption of artificial intelligence powered a semiconductor and AI-hardware export boom. The financial year's principal disruption came from the escalation of conflict in the Middle East from February 2026. This drove crude oil prices to a peak in early April 2026 and briefly broke the downward trend in global inflation.
The shock proved contained by mid-June, as a de-escalation between Iran and the United States and the reopening of the Strait of Hormuz reversed much of the move before the year closed. Alongside the conflict, an intensifying contest between the United States and China over advanced technology added headwinds to the technology advance. Though largely priced in, continued uncertainty over US trade and tariff policy also remained a defining feature of the global landscape.