Global economy: deceptive stability

Hence, the world economy maintained a deceptive stability throughout 2025. However, persistently high economic policy uncertainty is expected to dampen global momentum over the forecast horizon. World output growth is projected to decline from 2.5% in 2025 to 2.0% in 2026. International trade remains constrained by a protectionist environment: while global trade will expand by 4.5% this year, growth is expected to slow sharply to 1.5% in 2026.

Risks to the global economy are diverse. Beyond potential escalation of trade and geopolitical conflicts, vulnerabilities include possible disruptions to international supply chains, particularly in critical raw materials. Strategic use of trade policy instruments marks a structural break in the global economic world order. Despite bilateral agreements, U.S. tariff levels remain historically high, weighing on global output throughout the forecast period. Additional risk factors include elevated public debt levels in G7 countries, rising interest rate burdens, and the possibility of abrupt devaluations in technology stocks amid the ongoing AI (artificial intelligence) investment boom—factors that increase financial market fragility. On the upside, falling energy prices and productivity gains from AI-related investments could provide positive impulses. Overall, the global economy is undergoing a structural shift toward a geopolitically fragmented system, accompanied by an erosion of multilateral trade norms.

Regional Developments:

• United States: Inventory build-up and expanded private investment offset tariff-related headwinds. Real GDP growth is expected at 2.0% in 2025, moderating to 1.7% in 2026 amid heightened policy uncertainty.
• China: Despite the real estate crisis, fiscal and monetary stimulus measures support growth of 4.7% in 2025, slowing to 4.3% in 2026 due to underutilized capacity and trade headwinds.
• Japan: A weak yen, stronger exports, and corporate investment underpin growth of 1.2% in 2025, easing to 0.7% in 2026 as export and industrial momentum fades.
• Euro Area: Growth remains moderate at 1.4% in 2025, declining to 1.1% in 2026 under pressure from U.S. tariffs and debt sustainability concerns. 
  - France: Political uncertainty limits growth to 0.7% in 2025 and 0.8% in 2026.
  - Italy: Weak fundamentals result in growth of 0.5% in 2025, rising slightly to 0.7% in 2026.
• United Kingdom: Following a strong start to the year, GDP expands by 1.4% in 2025, slowing to 1.2% in 2026.