Global Growth Outlook to Remain Stable Amidst Headwinds
The latest global growth projections from the International Monetary Fund (IMF) suggest that the world economy is set to maintain a steady expansion of 3.3% in 2026, despite a complex mix of supportive and restraining forces.
In a review note, analysts at Cowry Asset Limited said the forecast represents a marginal two-basis-point deviation from the IMF’s October 2025 outlook and reflects the balancing effect of easing inflation, softening energy prices, and moderating oil demand, weighed against persistent trade tensions and policy uncertainty.
According to the IMF, global growth momentum remains underpinned by advances in high-tech sectors, even as broader economic activity faces headwinds from tariffs, geopolitical risks, and tightening financial conditions.
While these factors are expected to suppress activity levels in the near term, their drag on growth is projected to fade through 2026 and 2027. The IMF now sees global output expanding by 3.3% in 2026 and moderating slightly to 3.2% in 2027, marking a mild deceleration from the estimated 3.3% growth recorded in 2025.
In advanced economies, growth is projected at 1.8% in 2026 and 1.7% in 2027, reflecting subdued demand, lingering inflation pressures, and structural constraints.
The United States is expected to grow by a relatively robust 2.4% in 2026, supported by fiscal stimulus and lower policy rates, as the adverse impact of trade barriers gradually diminishes.
This marks a 0.3 percentage point upward revision from the October forecast, driven by stronger-than-expected GDP performance in Q3 2025, a rebound in early 2026 following the federal government shutdown, and a carryover effect into the new year.
In the euro area, growth is expected to remain subdued at 1.3% in 2026 and edge up to 1.4% in 2027, supported by increased public spending, particularly in Germany, alongside strong performances in Ireland and Spain.
However, unresolved structural challenges, persistent energy cost pressures, and weaker competitiveness relative to technology-driven economies continue to constrain the region’s outlook.
In emerging markets and developing economies, growth is expected to hover just above 4.0% in both 2026 and 2027. China’s growth forecast for 2025 has been revised upward to 5.0%, reflecting policy stimulus and increased lending for investment, while 2026 growth is now projected at 4.5%, supported by lower effective US tariffs and continued stimulus.
For sub-Saharan Africa, growth is projected to accelerate modestly to 4.6% in 2026 from 4.4% in 2025, driven by macroeconomic stabilization and reform efforts in several key economies, alongside improving domestic demand and easing inflation pressures.
Global inflation is expected to continue its downward trajectory, easing to 3.8% in 2026 and 3.4% in 2027, broadly in line with earlier projections. While inflation in the United States is projected to gradually return to its 2% target by 2027 as tariff effects dissipate, price pressures are expected to remain more persistent in countries such as Australia and Norway.
In the euro area, headline inflation is forecast to stabilize around 2%, while in China, inflation is expected to rise modestly from low levels. Despite the broadly stable outlook, the IMF cautions that downside risks remain elevated.
These include potential reversals in productivity expectations tied to artificial intelligence, which could trigger market corrections and dampen investment, renewed trade tensions, geopolitical flare-ups, and mounting fiscal pressures that could push long-term interest rates higher.
On the upside, faster adoption of AI and sustained easing in trade tensions could provide additional support to growth and productivity. Looking ahead, the IMF emphasizes that lifting medium-term growth prospects remains the most durable solution to global macroeconomic challenges.
Structural reforms in labor markets, education, regulation, and competition, combined with investments in digitalization, artificial intelligence, renewable energy, and energy efficiency, are seen as critical to driving productivity, job creation, and sustainable expansion’. Prague Stock Exchange Ends Growth Streak with 1.4 pct Drop
