Global economic outlook for 2026

By Soren Cocozza

The key note for global economy---slower growth coincides with declining inflation

It is expected that in 2026, global economy will slow down significantly. IMF and OECD have both predicted that global GDP growth will drop to around 3% this year, continuing the low growth trend since the transition period in 2025.

What is the main reason which results in the deceleration of global growth? The following factors definitely should not be ignored. Lagging effect of trade tension is still intensifying; the uncertainty of policies among countries has also been continuously increasing; flip-flopping policy adjustments have left market participants at a loss, also making investment decisions extremely cautious.

Meanwhile the weak domestic demand in major economies has made the situation even worse. Amid such uncertain environment, frugal consumers are tightening their purse strings, also business orders have decreased, and economic growth are running out of steam.

It is expected that inflation will further decline in 2026 globally, which drives inflationary pressure to be in a moderate downward trend in most countries. The easing of inflation has created room for central banks around the world to adjust the monetary policies, expecting that new impetus will be injected into the economy through measures such as interest rate adjustment.

At present, there are significant differences in economic situation among economies. Major economies such as the US, China and Europe are in different economic cycles. It is expected that the Federal Reserve will tend to adopt a defensive interest rate cut in an effort to ensure the smooth progress of the economy, despite economists has been criticizing the Fed has been flying blind in the market and economy.

China will continue to actively conduct economic transformation and strengthen new growth drivers. In Europe, although inflation has successfully been reined in, the issue of long-lasting sluggish growth has still remained unsolved.

The global economy in 2026 is destined to be a year of "moderate slowdown and structural differentiation". Amid the backdrop of slowing growth and falling inflation, AI and geopolitics will become the key forces reshaping the global economic landscape.

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Neville Missan

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