Global growth is projected to decelerate from 3.4% in 2025, to 3.3% in 2026 and 3.2% in 2027. The pace for 2027 would mark the slowest pace of growth post-pandemic. Inflation is expected to continue moderating and return to central bank targets.
Economic and geopolitical uncertainty have moved up again in recent weeks. That is adding to risk premiums in credit markets. Equity markets have already become more volatile.
High government debt and elevated sovereign bond yields are limiting fiscal options across advanced economies. The UK and Japan face near multidecade highs in long‑term yields in response to mounting debt concerns, which increases the debt needed just to service that debt.
In the US, growth has repeatedly outperformed expectations through 2025, supported by strong AI‑related investment and equity‑market gains. Tax refunds and fiscal stimulus are expected to lift activity early in 2026 before momentum fades later in the year. The unemployment rate is expected to stabilize due to constraints on the supply of workers and the low level of payrolls needed to hold the unemployment rate steady.
Across Asia, growth is forecast to cool next year in response to weaker performance in China. Government spending and household consumption are expected to cool amid choppy trade waters. Firmer growth in South Korea and emerging Southeast Asian economies will buoy regional gains. In Europe, increased defense spending provides modest support but is unlikely to fully counteract the region’s broader growth deceleration. An end to the war in Ukraine and the rebuilding required is an upside risk to growth in the region.