International and Monetary Economics Network

The world economy still shows resilience amid headwinds, but do not underestimate its fragility

• Global GDP growth remains solid and global trade has proven more resilient than expected. However, higher tariffs and rising protectionism will weigh on global growth and trade in 2026 and 2027.
• In our Global Economy Flash (GEF), we expect global economic output to increase by 3.2 percent in 2026 (+0.1 percent compared to our January GEF). For 2027, we currently anticipate a slight acceleration to 3.3 percent (+0.1 percent compared to our January GEF).
• The U.S. economy benefits from the AI boom, but the rest of the economy is less strong. U.S. households benefit from an expansionary fiscal policy and past interest rate cuts. Inflation is too high and risks remaining persistently elevated. In addition, we should still worry about the independence of the Fed.
• The Chinese economy depends on exports and manufacturing, while domestic demand continues to struggle.
• The Euro area remains on a solid growth path despite structural challenges and high debt in some countries. The German fiscal stimulus will gradually lift growth in Germany and also spill over to other European countries.
• Monetary and fiscal policy: Fiscal policy is mostly expansionary, while monetary policy is becoming increasingly divergent.
• The Swiss economy remains resilient with modest growth rates. The pharmaceutical sector will be less of a growth driver than in the past.
• Many (mostly downside) risks, among them: Conflicts and geopolitical tensions have the potential to escalate, supply chains for critical raw materials are fragile, the AI boom could end abruptly, and potential public debt crises.