Growth Story

Robust domestic fundamentals and structural reforms are likely to keep India among the fastest-growing major economies in 2026

- By LOUIS KUIJS

THE GLOBAL ECONOMY HAS held up despite US tariff hikes and related uncertainty, supported by artificial intelligence (AI)-driven investment, tech-related spending, lower inflation and accommodative financial conditions.

For the all-important US economy, we forecast real GDP growth of 2 percent in 2026—similar to 2025. Real consumer spending growth will hit a cycle low over the next two years, while AI-related infrastructure should sustain investment growth. We expect a 25-basis-point (bp) Fed rate cut in December, followed by 50 bps of easing over the second half of 2026, though timing may shift due to data delays.

Europe should again see modest growth in 2026, with Germany rebounding while others go slow. Disinflation potential appears limited, leaving little scope for additional rate cuts.

China’s domestic demand will likely stay subdued, and exports should slow. But we have raised our 2026 growth forecast for China to 4.4 percent due to lower US tariffs. Across the rest of Asia-Pacific, reduced tariff uncertainty, strong tech exports and resilient demand have prompted us to lift our 2026 GDP forecast to 4.2 percent.

TARIFFS AND TRADE