Coping With Disruption: Economic and Political Outlook for the Advanced World

The 2026 outlook projects stable but disrupted global growth, with the US navigating Trump-related policy shocks while Europe relies on falling rates and German fiscal stimulus. Central banks are expected to pause easing as structural labor shortages keep inflation risks tilted to the upside.

Key Takeaways

• 1.Global growth in 2026 is expected to remain close to trend, though the US faces potential stagflationary pressures from Trump-era tariffs and an immigration crackdown.
• 2.Central bank paths are diverging; the Fed has limited room for cuts due to sticky inflation, while the ECB and BoE are reaching the end of their easing cycles with future hikes projected for 2027/2028.
• 3.Germany is shifting towards a major fiscal expansion, including a 'fiscal bazooka' worth roughly 2.5% of GDP focused on defense and infrastructure, effectively loosening the constitutional debt brake.

Table of Contents

• Outlook 2026: not too bad
• Trump less popular = more bark, less bite?
• US: deporting Goldilocks
• Fiscal stimulus incoming
• Making room for the AI boom
• Fed watch: no longer a snoozefest
• China
• Europe
• Eurozone members: the South-North divide
• Germany
• France
• United Kingdom
• Key financial forecasts
• Global economic forecasts

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