The global economy enters 2026 under the influence of contrasting forces, which will result in moderate GDP growth overall but widening gaps in performance and policy. The economic benefits of AI will strengthen, fuelling another year of US outperformance as adoption elsewhere lags. China’s technological strides won’t offset deep structural imbalances, leaving the economy in deflation and growth stuck near 3%. Many central banks will continue to loosen policy, with the ECB and Bank of England cutting further than markets expect. But President Trump won’t get the aggressive cuts that he wants. Meanwhile, fiscal strains in advanced economies are likely to cause bouts of market volatility, especially in Europe.
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