Economic Environment in 2026¹

While overall economic growth rates in 2025 were still supported by frontloading effects and the associated temporary buildup of inventories, we expect the higher tariffs on imports into the United States to have a dampening effect on growth in 2026. Rising consumer prices in the United States are expected to have a stronger impact. The diversion of global trade flows triggered by higher tariffs in the United States and countermeasures by its trading partners is impacting growth in other regions and resulting in higher import pressure, especially in Europe.

Trends in the Global Economy in 2026

We anticipate global GDP will grow by 2.7%, slightly weaker than in 2025. Growth is expected to ease in both advanced economies (+1.6%) and emerging markets (+4.0%) relative to the previous year.

For the European Union (EU), we assume that overall growth will slow from 1.6% in 2025 to 1.2% in 2026. In France and Italy, we expect growth to remain low at just under 1%, while we assume that GDP growth in Spain will decline to 2.3%. Ireland, which had double-digit growth in 2025, is playing a significant role in the slowdown in growth in the EU. For 2026, we expect a slight decline in Ireland’s GDP.

We expect German GDP to grow by just under 1%, after having largely stagnated in 2025. Government spending on infrastructure and defense is expected to support growth. In foreign trade, on the other hand, the headwind caused by higher U.S. tariffs is becoming more apparent.

At 2.4%, eastern EU countries are expected to grow at around the same rate as in 2025, supported by rising government spending and solid growth in private consumption.

For the United Kingdom, we expect growth (+0.9%) to be slightly lower than in 2025 (+1.3%) as fiscal policy is tightened and private spending is dampened by rising social security contributions.

In the United States, the demand-dampening effects of higher import tariffs and a weaker exchange rate are expected to become more apparent. In addition, the restrictive immigration policy will increasingly be reflected in the labor supply. On the positive side, tax cuts will have an expansionary effect, allied with a possible improvement in the trade balance and private consumption that remains stable overall. Overall, we expect growth of 2.3% in 2026 (2025: +2.3%).

In China, the economy is expected to experience weaker growth. We expect growth in 2026 to be broadly in line with the target of the Chinese government and will be around 4.5% (2025: +5.0%). This forecast assumes that China will manage a modest increase in exports in bilateral trade despite the higher import tariffs imposed by the United States, that private consumption will continue to rise and that investment will gather pace again at the beginning of the new five-year plan.

We expect growth to slow slightly for the other emerging Asian markets in the somewhat weaker global environment. Growth prospects in the region remain high due to integration in international supply chains and increasing local demand (2026: +5.0%, 2025: +5.9%). In India, we expect above-average growth of around 6.5%, and for the ASEAN countries growth of slightly more than 4%.

For Japan, we expect slightly weaker GDP growth again (2026: +0.5%, 2025: +1.2%). Overall, economic momentum in Japan remains subdued because the central bank is gradually raising interest rates, real income increases are comparatively modest and exports are suffering from higher U.S. tariffs.

In South America, we anticipate weaker overall growth (2026: +2.1%, 2025: +2.8%). Argentina is unlikely to be able to maintain the high growth of over 4% witnessed in 2025, even if the economic tailwind derived from reforms continues. We forecast growth of around 3%. Growth in Brazil is expected to slow to just under 2%. This means that the cyclical slowdown in the economy, already evident in the second half of 2025, is set to continue.

1 Our assumptions account for current estimates by external institutions, including economic research institutes, banks, multinational organizations and consulting firms.