economy
December 30, 2025
Five charts that explain the global economic outlook for 2026
Inflation is predicted to cool but uncertainty over AI-driven growth and trade policy poses risks in the year ahead
TL;DR
- The global economy was more resilient in 2025 than feared, facing headwinds from trade wars, geopolitical tensions, and conflicts.
- Hopes for 2026 include passing the worst of inflation shocks and central banks lowering interest rates, though pre-Covid borrowing costs are a distant memory.
- AI's catalytic potential is a major focus for 2026, with potential for productivity growth versus fears of a US tech bubble.
- Deutsche Bank clients ranked a tech bubble bursting as the top risk for 2026.
- Global GDP growth is forecast to moderate in 2026 due to trade impacts from tariffs and squeezed consumer demand.
- China's growth is expected to slow, while the US is projected to lead G7 growth.
- Inflation is expected to slow markedly in 2026, enabling central banks to end interest rate cuts.
- Concerns exist about the US Fed chair's replacement and potential political pressure on rate cuts.
- Britain risks being a 'disinflation laggard', though a recent budget could lower inflation.
- Inflation in the Eurozone is near the ECB's target, deterring action.
- Economists worry inflation could rekindle, limiting further rate cuts.
- International trade tensions have subsided but remain elevated due to US tariffs and geopolitical factors.
- Geopolitical uncertainty is expected to lead to further trade fragmentation and supply chain diversification.
- Governments faced rising borrowing costs in 2025, with the US, UK, and France particularly pressured.
- Fiscal vulnerabilities remain, with highly indebted governments facing scrutiny.
- Hiring demand tumbled in rich countries in 2025, leading to rising unemployment in the US and UK.
- Further increases in joblessness are a significant risk for 2026, influenced by tax policies, business uncertainty, and AI adoption.
- AI-fuelled job displacement shows limited signs so far, but investment is accelerating.
- UK youth unemployment is a cause for political alarm.
- Workforce participation is pressured by demographic shifts like population ageing and ill-health.
- UK unemployment is at 5.1%, a near-decade high outside of Covid, and could rise further.
- US unemployment is at 4.6%, a four-year high.
- Despite job market pressures, wage growth is expected to remain resilient, but this could spook central bankers.
- Policymakers need to address rising unemployment and the risk of shrinking pay packets in Britain.
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