Global economic predictions for 2026

Over the last two months, international financial media outlets have published thousands of expert forecasts on how the global economy is likely to evolve in 2026. Some are understandably sceptical of expert forecasters’ ability to predict the future. Still, it is interesting to analyse the ritual of economic forecasting, especially after a year of turmoil in geopolitics.

The Economist argues that we are living in a Donald Trump World. This time last year, few if any analysts predicted that the US president’s assault on global trade through the imposition of tariffs would be so incisive and widespread. As long as he remains in power, international trade will never be the same again. The golden years of globalisation are over and may never return.

Many analysts fear that in the richer countries there is a serious disconnect between the real economy and financial markets. Global equities ended 2025 at almost record highs.

Still, many rich countries are living beyond their means and keep borrowing. The risk of a sovereign bond and private debt market crisis is growing. Some analysts suggest that ordinary people’s growing affordability concerns are likely to affect consumer spending and, in turn, GDP growth.

This year marks America’s 250th anniversary of its founding. Americans will have the chance to deliver their verdict on how their country is being managed as they vote in mid-term elections. The Economist rightly argues that even if the Democrats take the House of Representatives, Trump’s rule by bullying, tariffs and executive orders will continue.

Now that the US president has cut the umbilical cord that kept Europe’s political, economic and defence strategies closely linked to the US, European leaders face daunting challenges that they have ignored for too long.

Europe is now committed to increasing defence spending, keeping Trump happy by flattery, boosting economic growth, resolving immigration tensions that worry far too many voters, and reducing massive deficits.

Austerity is a dreaded option, as Kier Starmer is learning the hard way. So, one prediction is that hard-right parties will continue to gain strength in Europe.

In 2027, France and Italy face general elections. The focus of political leaders will not be so much on making the EU stronger at a time when the US is increasingly becoming hostile to its old allies. Expect national leaders to pander to their voters’ aspirations in the discussion on the next EU budget for 2028-2034. They will once again kick the can of the much-needed Union structural reforms down the road.

Many rich countries are living beyond their means and keep borrowing. The risk of a sovereign bond and private debt market crisis is growing

So far, financial markets have not been overly concerned by the seismic geopolitical upheavals of 2025. When Trump appoints Jerome Powell’s replacement as chair of the Federal Reserve in May, financial markets will almost certainly signal whether they trust the new appointee’s independence and commitment to fiscal rectitude. If they are not convinced, expect shocks in financial markets.

In 2025, we saw markets recalibrating to higher rates, geopolitical reshuffling around the second Trump administration and tariffs, and AI moving from hype to deployment. This development will eventually impact the job market. Professional and knowledge-worker classes that previously felt insulated are now beginning to feel anxiety about job security.

Morgan Stanley describes 2026 as ‘The year of Risk Reboot’, a period where markets could shift from macro anxieties to micro fundamentals. Some analysts agree that this year we will continue to see the adoption of the “policy triumvirate”: fiscal stimulus, monetary easing and deregulation. In the case of the EU, this may mitigate the risk of a recession, but it will just prolong the Union’s steady decline into global geopolitical irrelevance.

Russia and China will test American commitment to allies through what The Economist calls “grey-zone” provocations in northern Europe and the South China Sea. Europe can no longer rely on benefitting from the post-World War II peace dividend. Great-power competition may not yet lead to outright war, but we are likely to see more focus on space-based intelligence, drone technology and AI-powered cyber operations.

Experience teaches us that forecasting the future is not an infallible science. Hopefully, economic forecasters do not pretend to have the skills of Baba Vanga, the blind Bulgarian mystic and clairvoyant who gained worldwide recognition for her so-called predictions about future events.

Do not expect 2026 to unfold precisely as experts predict. More important than the specific predictions are the themes to which informed observers devote their attention, such as the application of AI in more aspects of our lives. Some themes will prove accurate; events will derail others.