Global Outlook. The 2026 Roller-Coaster Edition

If there is any truth in our forward-looking assumptions, then the years ahead are likely to be eventful—and, for better or worse, entertaining. It feels as if we are slowly being hauled up the first slope of a roller coaster: the tension builds, the mechanism creaks, and you are fully aware that escape is no longer an option. At best, you can change seats before gravity takes over.

After all, we are firmly locked on planet Earth, inside a deeply interconnected globalised economy, overseen by a single superpower that happens to issue the world’s reserve currency. This limits the menu of choices. Rebalancing assets is about as adventurous as it gets. Geography, sectors, instruments—these can be adjusted, assuming your assets are liquid enough to move before the ride accelerates.

The macro backdrop, meanwhile, is not exactly apocalyptic. Global real GDP (all growth figures here and below refer to real GDP) is projected to expand by around 3.1–3.2% in 2026—not a bad outcome by recent standards. Advanced economies are expected to grow at roughly 1.5–2.0%, while emerging markets, led by Asia, should deliver a robust 4.0% pace.

Inflationary pressures are likely to ease overall, although some advanced economies—notably the United States—may continue to tolerate inflation running above the global average. Apparently, not all price pressures are created equal.

The key risks look strikingly familiar, suggesting that uncertainty, too, has a structural component:

1. Persistent ambiguity around tariff policy under the current US administration

2. Structural headwinds, including ageing populations, rising debt burdens, and mounting climate-related pressures on producers

3. Financial-market volatility, which shows no intention of becoming less fashionable

4. Ongoing regional conflicts from 2025, now joined by renewed manoeuvring around Venezuela and a potentially explosive situation involving Iran

   
   

With that in mind, let us turn to the major markets.

United States of America

The world’s largest economy remains, reassuringly, the world’s largest economy. It continues to post enviable growth by developed-market standards, with real GDP expected to expand by around 2% in 2026. Inflation is likely to remain higher than elsewhere. The current-account deficit will, as ever, be comfortably financed by capital inflows. No mystery there.

A high-interest-rate environment is unlikely to disappear anytime soon, although the odds of at least a modest rate cut are very real. Yes, this would nudge inflation higher. But should anyone really lose sleep over, say, a 1% rise in consumer prices when a substantial share of income is driven by capital gains that tend to outrun inflation anyway? Unlikely. Faced with imperfect options, policymakers—much like investors—generally choose the lesser evil and call it prudence.

Debt pressures continue to mount, and they do matter. Yet, when US policymakers compare their debt-to-GDP ratio with those of many European peers, anxiety levels tend to remain manageable. More intriguingly, if Washington effectively ends up “running” Venezuela—following what increasingly resembles a textbook hostile M&A—one cannot rule out attempts to extract economic value to help ease the American debt burden. Synergies, after all, are always promised.

Should the United States manage to bring its debt trajectory under control over the next decade, it may once again present itself as one of the world’s so-called “invincible” economies—at least until the next cycle tests the claim.

The key drivers of the US economy include:

• Productivity and AI monetisation: The transition from hype to earnings is under way, though valuation risks remain stubbornly present.

• Consumer versus credit cycle: Employment remains strong, but savings are depleted and delinquencies are creeping higher.

• Fiscal dominance: Large deficits imply a higher term premium and persistent volatility in bond markets.

• Late-cycle Fed easing: Rates decline slowly, favouring financials and high-quality assets.

• Industrial policy: Reshoring, defence, energy, and infrastructure continue to benefit from generous public spending.

  
  

These strengths are matched by a familiar list of risks:

• AI valuation correction: Earnings may struggle to keep pace with expectations, leading to multiple compression.

• Consumer hard landing: Credit stress could hit consumption faster than consensus assumes.

• Fiscal stress: Rising debt-service costs keep rates higher for longer.

• Policy error: The Fed cuts too late—or too cautiously.

• Election and trade risk: Post-election tariffs or fiscal shocks could unsettle markets once again.

Latin America

As anticipated in our January 2025 outlook, Venezuela has emerged as a black-swan factor—albeit not an entirely unexpected one. The more interesting question is not whether it matters for Latin America, but how. Will the impact be supportive or depressing? Unless the United States finds itself dragged into a prolonged local entanglement, a regime change in Venezuela is more likely to prove regionally positive than disruptive. Unless it leads to a civil war.

The region’s main economic drivers are fairly straightforward:

• Commodity exposure: Energy, metals, and agriculture support exporters, particularly in an environment of rising commodity prices.

• Monetary easing: Early rate cuts provide a tailwind for domestic demand.

• Reform divergence: Argentina and Peru show signs of improvement, while Brazil and Mexico continue to lag.

• FX undervaluation: Some downside protection exists, though volatility remains a permanent companion.

On average, real GDP growth in Latin America is expected to fall within a 2.3–2.5% range in 2026—hardly an acceleration compared with 2025. Regional inflation expectations, however, are surprisingly modest, hovering around 3.0% on average (Argentina’s famous inflationary tango notwithstanding).

Argentina itself remains a curious and increasingly interesting case, as already noted in last year’s report.

That said, the brightest prospects for 2026 belong to

1. Paraguay

2. Peru

3. Panama.

All three economies are targeting growth rates close to 4.0%, supported by strong export performance. Combined with relatively low inflation targets, this “PPP” trio looks particularly attractive for debt investors. Mexico, by contrast, has slipped into the laggards’ category, joined by Brazil and Chile.

The key risks for the region include:

• Inflation surprises

• High sensitivity to US and Chinese demand and tariff policies

• Commodity-price volatility

The rule of thumb is therefore simple: countries whose political leadership can dance to the rhythm of the world’s two largest rivals—without stepping on either’s toes—stand to benefit most if commodity prices continue to rise.

MENA (Middle East and North Africa)

In 2026, MENA is expected to be one of the global growth champions. Forecast real GDP growth of 3.6–3.7% comfortably exceeds the global average. Despite its reputation, the region is relatively calm on the conflict front—setting aside the perennial Israel-versus-everyone-who-dislikes-it saga, to which markets appear largely desensitised by now.

Economic momentum is supported by elevated investment levels and strong domestic demand. Structural diversification efforts in recent years are finally paying off, boosting non-oil GDP, even as oil production itself continues to rise.

When combined with relatively low inflation across the GCC—whose currencies remain pegged to the US dollar—the region becomes an increasingly compelling candidate for portfolio rebalancing. Non-GCC MENA countries that are net oil importers face a less comfortable inflation outlook, typically in the 6–7% range for 2026.

The key drivers of regional growth include:

• Hydrocarbon revenues: Strong fiscal buffers across the GCC.

• Massive public investment: Vision 2030 programmes, LNG projects, and infrastructure spending.

• Non-oil expansion: Rapid growth in tourism, services, and logistics.

• FX stability: Dollar pegs help anchor inflation in GCC economies.

• Geopolitics: Headline risk remains high, though macroeconomic spillovers are limited for GCC states.

Key risks for the region are familiar:

• Oil-price collapse: Weaker fiscal balances, particularly for non-GCC countries.

• Execution risk: Delays or inefficiencies in large-scale projects.

• Geopolitical escalation: Potential spillovers into trade, tourism, and capital flows.

• FX stress outside the GCC: Devaluations in countries such as Egypt and Tunisia.

• Global slowdown: Reduced demand for energy and services.

The likely winners in terms of economic resilience in 2026 are:

1. Israel

2. Qatar

3. The UAE

Real GDP growth in these economies is expected to reach approximately 5.0%, 4.9%, and 4.4% respectively, with inflation well contained in the 2.0–2.4% range—lower still in Qatar’s case.

At the other end of the spectrum, weaker performances are expected from Kuwait (slower structural growth and limited diversification), Bahrain (a smaller growth base and banking-sector sensitivities), and Tunisia (policy risk and weak private investment).

Turkey remains an intriguing outlier. Real GDP growth is expected to reach 3.4–3.8% in 2026, but the country’s seemingly endless saga of persistently high inflation—still in the low twenties—keeps foreign-exchange risks firmly in focus. Export-oriented sectors, including tourism and manufacturing, may continue to benefit, while banks and import-dependent industries are likely to bear the cost.

 

Asia

Asia remains the steam engine of the global economy—but in 2026, it looks like India will be firmly in the driver’s seat, not China. Overall, the region is projected to grow around 4.1%, slightly slower than 2025 but still comfortably above the global average.

Growth is concentrated in Emerging Asia—India and Southeast Asia—while China continues to be a significant engine, albeit a slowing one. Inflation across most of Asia is expected to stay muted or near targets, supported by soft domestic demand and global disinflationary pressures. China may even see ultra-low inflation of around 0.7% by 2026.

Key growth drivers:

• High-value exports: Semiconductors, electronics, telecom gear.

• Monetary policies: Accommodative or neutral stances support investment and credit growth.

• Regional trade integration: ASEAN and East Asian supply chains enhance resilience despite global headwinds.

• Demographics: Large, youthful populations in South and Southeast Asia underpin consumer demand and labour supply.

Key risks:

• Trade policy & tariffs: Rising uncertainties, particularly from the U.S., could dent exports and investment.

• China slowdown: Weak consumer spending and property-sector drag may ripple across regional trade partners.

• External environment: Slower global trade and tighter financial conditions could hurt export-dependent economies.

• Monetary divergence: Some countries may find easing constrained by financial stability risks.

• Political & structural risk: Policy uncertainty (e.g., Bangladesh), geopolitical tensions, or weak structural reforms could slow growth.

The potential winners are as follows:

1. India

2. Philippines, Indonesia, and Malaysia

3. Korea and Singapore

Looking at individual economies, India takes the crown as the fastest-growing economy in Asia, with 6.3–6.6% GDP growth. The reforms and investments are finally paying off—they always do, don’t they? Inflation won’t be tiny, but it will be reasonable for an emerging-market powerhouse.

 The Philippines, Indonesia, and Malaysia are leading the pack, sharing the top spots in regional GDP expansion. Korea and Singapore follow closely behind.

China, the traditional engine of the region, has lost a bit of its sparkle. Real GDP growth is projected at 4.2%—still impressive, but slower than in previous years. Combined with very low inflation projections, China remains an attractive investment proposition.

At the other end of the spectrum, Japan, with projected GDP growth of just 0.5% and inflation around 2%, along with smaller commodity-dependent economies, lags behind. The regional picture is clear: emerging markets are the real engine, while advanced Asia stabilises at a slower, but steady, pace.

CIS (Commonwealth of Independent States)

From Asia, we move west to the CIS region—a patchwork of economies with widely differing fortunes. Some Central Asian and Caucasus countries are surging ahead, while overall growth is modest, hovering around 2.3%, below historical averages. Sanctions, weaker Russian performance, and global trade headwinds weigh on the region.

Inflation is falling but remains above advanced-economy norms, typically in the 6–9% range.

Key drivers shaping CIS economies in 2026 include:

• Commodity exports and terms-of-trade

• Sanctions and economic reorientation

• Investment and infrastructure: Strong public and private spending in energy, transport, and construction supports high growth in countries like Uzbekistan, Kyrgyzstan, and Tajikistan.

• Soviet-era trade linkages and regional integration: Deep interconnections remain relevant, though weaker Russian demand undercuts overall performance.

• Demographics and remittances

Key risks include sanctions, commodity-price volatility, FX and inflation pass-through, external demand weakness, and fiscal/policy constraints.

The top performers of CIS for 2026

1. Kyrgyzstan

2. Tajikistan

3. Uzbekistan, Georgia

The new leader in CIS of GPD growth is not Russia. Kyrgyzstan tops the list, with real GDP growth around 9.3% and inflation near 8%, driven by energy and construction investment alongside a solid fiscal position. Tajikistan follows at 8.1%, buoyed by metals exports and rising domestic demand. Uzbekistan rounds out the top three at 6.8%, thanks to strong investment, exports, and remittances.

Consumer inflation in these frontrunners is expected around 6–7%, normal for emerging markets. Republic of Georgia is expected to increase its GDP by 4.5 to 5.5%, keeping robust consumption intact, tourism recovery and assisted by structural reforms aimed at trade and investment attraction. Inflation in Georgia would be around 4.0-6.0%. 

Trailing economies include Russia, Azerbaijan, and Belarus. Azerbaijan is projected to grow 2.4–2.8%, limited by constrained diversification and lagging oil revenues. Russia will struggle to reach 1.0–1.5%, with inflation easing to 5–6%; sanctions and depressed investments are taking their toll. Belarus is slightly better, with GDP around 1.0–1.5% and inflation comparable to Russia, though its dependence on Russia and restricted logistics dampen growth potential.

Europe, UK, Switzerland, and Norway (EUCHGBNO)

Turning west, Europe continues its slow crawl toward growth. Can we declare it out of stagnation? Probably not. Europe remains in a delicate balancing act: the campaign to dis-inflate the economy has left GDP growth depressed, visible across the continent.

Germany—the continent’s economic engine—remains wobbly. Without a robust recovery over the next five years, one might need to call a doctor. Overall, Europe’s GDP is projected to expand 1.4–1.7%, with inflation around 2.0–2.3%.

Key growth drivers for 2026:

• Monetary easing: ECB and BoE cuts; SNB already accommodative

• Completed disinflation: Inflation near target restores real incomes

• Fiscal support & EU funds: Infrastructure, green transition, and defence spending

• Energy normalisation: Lower volatility versus 2022–24

• Services strength: Tourism, transport, health, and business services outperform

Key risks:

• Structural drag: Ageing population, low productivity

• Fiscal constraints: High debt in Italy and France limits stimulus

• Industrial competitiveness: Germany exposed to China slowdown and energy costs

• Political fragmentation: EU fiscal rules, UK election aftershocks

• External shocks: US slowdown or renewed energy/geopolitical stress

Within Europe, Spain emerges as a rare bright spot. Projected GDP growth of 1.9–2.2% owes less to luck than to necessity: historically higher energy costs forced Spain to maintain competitiveness. When the Russian gas supply was disrupted, most of Europe scrambled for expensive LNG, while Spain continued using Russian gas. Result: lower energy costs, moderate inflation, and competitive exports.

Norway follows, benefiting from domestic energy production, strong balance sheets, and low fiscal stress (GDP growth 1.5–2.0%, inflation 2.0–2.4%). Switzerland, Denmark, and the Netherlands round out the top tier, with strong financial, pharma, and tech sectors.

Laggards include Germany, Italy, France, and the UK—ironically, Europe’s founding members. Germany suffers from lost competitive edge, Italy and France from fiscal constraints, and the UK from weak productivity. Inflation across Europe ranges 2.0–2.5%, except Switzerland (1.0–1.5%).

Canada, Australia, and New Zealand (CAAUNZ)

Crossing the Atlantic, CAAUNZ economies sit somewhere between Europe and the high-flying emerging markets. Australia projects GDP growth of 2.0–2.4%, New Zealand just over 2.0%, and Canada trailing at 1.6–1.8%. Inflation for all three is expected between 2.0–2.5%.

Key growth drivers:

• Monetary easing and rate cuts

• Recovery in real incomes

• Cyclical upside for Australia

Key risks:

• Canada: Household leverage, mortgage drag, potential real estate bubble

• Australia: Export dependence (especially China), housing affordability

• New Zealand: FX volatility, limited fiscal stimulus

Australia is the clear winner in the region, promising decent growth and a favourable macro backdrop.

Here’s a tightened, punchier rewrite in the same Economist-lite, slightly ironic tone—same substance, sharper edges, smoother flow:

Potential Black Swans

While most investors have been fixated on the Russia–Ukraine war—and understandably so—the global worry list is quietly expanding. Latin America, long treated as background noise rather than headline risk, may be next in line for an unpleasant surprise.

Venezuela stands out. The probability of slipping into a period of serious civil unrest—if not outright civil war—is no longer negligible. This would hardly be a bolt from the blue, but markets have a habit of being “surprised” by things they have ignored for too long.

The next domino could be Colombia. The country’s president has been unusually personal in his criticism of President Trump, though rhetoric alone is unlikely to be the real trigger. Colombia controls a critical stretch of the land corridor between South and North America. Control that corridor, and you influence drug flows, migration routes—and, quietly, strategic logistics. Fewer observers mention the longer game: this is also one of the few places where China could, in theory, create an alternative inter-oceanic route, challenging Panama’s monopoly. That is a scenario the U.S. would not tolerate lightly.

A direct confrontation between the U.S. and Mexico remains highly unlikely. A clash with Brazil is even more remote—at least in 2026. Still, it may be worth revisiting this paragraph in twelve months’ time, just in case.

A far more dramatic black swan would be a civil war in Iran. Economic hardship is mounting, social pressure is building, and the geopolitical implications would be vast. Too vast, in fact, to do justice to in a few lines—suffice it to say that energy markets, regional stability, and global risk sentiment would all feel the shockwaves.

In Europe, the potential black swan looks deceptively bureaucratic: the EU–Mercosur trade agreement. Compared to tanks and missiles, it appears harmless. Yet it quietly undermines a strategic pillar of the EU—food security. Over time, it may also introduce health risks, as agricultural imports from outside the EU often operate under looser standards for pesticides and bio-stimulants. This is not a 2026 event; it is a slow-burner. But even swan eggs hatch eventually.

A collapse of a major cryptocurrency is another candidate, likely within a five-year horizon. The good news is that it probably won’t bring the global economy to its knees—crypto has become large enough to hurt its holders, but still small enough to spare everyone else.

As for an AI valuation correction—that ship has sailed. When everyone is already talking about it, it no longer qualifies as a black swan. At best, it’s a grey pigeon circling noisily above the market.

Global Winners and Takeaways  – The 2026 Roller-Coaster Edition

Looking across regions, the economies with the highest potential in 2026 are:

• USA

• India, Philippines, and Malaysia

• Paraguay, Peru, and Panama

• Kyrgyzstan, Tajikistan, Uzbekistan, Republic of Georgia

• Israel, Qatar, and UAE

• Spain, Netherlands, Norway, Denmark

• Australia

2026 promises another thrilling ride on the global economic roller coaster. Buckle up: some seats will soar, others may spin unexpectedly, and a few might throw you for a loop.

The heavyweights: The USA remains the world’s economic powerhouse—steady GDP growth, higher inflation, and a mountain of debt won’t slow it down. AI, productivity gains, and industrial policy give it plenty of horsepower, as long as fiscal discipline and tariffs don’t trip it up.

The rising stars: India grabs the driver’s seat in Asia with 6.3–6.6% GDP growth, while Philippines, Indonesia, Malaysia, Korea, and Singapore follow closely. China continues as a reliable, low-inflation engine, and Japan… well, let’s just say it’s taking the scenic route at 0.5% growth.

Regional show-offs: Paraguay, Peru, Panama lead Latin America, Israel, Qatar, UAE dominate MENA, and Kyrgyzstan, Tajikistan, Uzbekistan and Georgia surprise in CIS. Africa quietly flexes with 4–4.4% growth, led by Ethiopia and West African trade hubs. Meanwhile, Europe’s modest performers—Spain, Norway, Switzerland—outshine laggards like Germany, Italy, France, and the UK, and in CAAUNZ, Australia steals the spotlight.

Takeaways: The world economy is expanding, led by emerging markets—but stability, strategic planning, and law-based governance still matter. Inflation, interest rates, and geopolitical shocks are the black swans of the day. The 2026 winners will be agile, resilient, and just clever enough to enjoy the ride while others scream.

So, strap in, hold on, and enjoy the ride—because no matter how carefully you’ve positioned yourself, the next black swan might just flip your car upside down, and that, dear reader, is where the real fun begins.