Forecasts At A Glance Global Economic Outlook

The global economic outlook for 2026 is resilient but faces significant headwinds from the Iran war energy shock and US trade protectionism. Growth forecasts have been generally lowered for Europe while inflation expectations have risen.

Key Takeaways

• 1.The Iran war supply shock is the primary downside risk, inflating energy prices and slowing global growth, though fundamentals like labor markets remain resilient.
• 2.US trade policy under Trump, specifically higher tariffs and immigration crackdowns, is expected to dampen trend growth and fuel inflation.
• 3.Central bank paths are diverging: the Fed may pause after one last cut in June 2026, while the ECB is expected to hike rates due to energy-driven inflation.

Table of Contents

• Forecasts at a Glance
• Global outlook: positive fundamentals, rising Iran war risk
• Forecast changes
• US: Trump’s policies dampen the fireworks
• China: serious challenges after years of capital misallocation
• Japan: policy normalisation
• UK: disinflation delayed
• Eurozone: Iran war and US tariffs hurt, domestic policies support growth
• Germany: big fiscal boost
• France: political uncertainty and a risk of reform reversals
• Italy: modest reforms and a fiscal boost support domestic demand
• Spain: following through on significant catch-up potential
• Portugal: rapid – but volatile – growth
• Disclaimer

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