Global Growth Outlook Remains Steady Despite Shifting World Dynamics

Global Economic Growth Forecast

By Hari Kishan

Geopolitical Risks and Economic Stability

BENGALURU, Jan 28 (Reuters) - Global economic growth will be 3% in 2026, exactly as forecast a year ago, according to a quarterly Reuters poll of economists, suggesting they are unfazed by the abrupt and seismic shift in how the U.S. trades with others and treats its allies.

Regional Growth Projections

But unusual stability across a range of views at a time of so much upheaval suggests trouble may be lurking underneath, some forecasters say, particularly given the world economy already was growing at about that same pace in the years since the pandemic.

US Economic Growth

Many say the effects of U.S. President Donald Trump's sweeping tariffs announced last year and the resulting disruption to business are only starting to appear, with the added uncertainty of a pending Supreme Court ruling on their legality. That makes coming up with numbers more difficult. 

Euro Zone and China Growth

FURTHER GEOPOLITICAL SHOCKS THE MAIN RISK

A majority of 220 economists polled from around the world revised back up their 2026 view in recent months and cited "further geopolitical shocks" as the main downside risk now most central banks are done or nearly done cutting interest rates.

A sharp correction in frothy global equity markets, which touched record highs again this week, came second in Reuters polls conducted from January 6-28.

"Upside surprises to global growth are very welcome given all the geopolitical and trade policy uncertainties over the past year, but this is not a global economy that is firing on all cylinders," wrote economists at HSBC.

"Many of the upside surprises to growth have been delivered by three AI-related driving forces which are offsetting headwinds from trade fragmentation, weakening demographics and high government debt."

Continued strong U.S. investment in artificial intelligence as well as a short-term boost from expected tax rebates could further lift overall growth in the world's largest economy, even if concerns linger about the strength of the job market.

So economists have been revising back up their global growth forecasts and now the consensus is the same as what it was last year.

U.S. GROWTH REVISED UP SHARPLY

But that was before Trump last April upended an increasingly integrated system of global trade by slapping hefty tariffs on most economies, including some of the closest U.S. allies, and using tariffs erratically as a negotiation tool. 

Asset prices tumbled, and in April economists ratcheted down their views for 2025 to 2.7% and 2.8% for the current year. That was a large revision in such a short period of time by historical standards, and it came with a warning recession risks were rising.

Now, with the transatlantic partnership at its weakest since its inception, new alliances rapidly being forged, and countries on every continent looking to diversify trade in response to Trump tariffs, the median forecast for 2025 has been bumped up to 3.2%, and 2026 is now back up to 3.0%.

A like-for-like analysis shows 80% of economists upgraded their 2026 global growth forecasts in the last three months.

Across much of the economic research and comments from contributors, there was a common theme of forecasters throwing in the towel based on recent performance.

"You know, tariffs happened, global trade patterns adjusted, but the adjustment was very much smoother than what we had expected," said Nathan Sheets, global chief economist at Citi, who in recent years had been relatively pessimistic.

"(There's) always a risk that we're getting it wrong and overdoing it, but...at this stage I'd rather have a forecast that I'm marking down rather than a forecast I'm tired of always marking up," said Sheets. 

2.3% US ECONOMIC GROWTH THIS YEAR?

Median 2026 growth forecasts rose for 28 of 50 economies polled. Of the rest, 10 were unchanged and 12 downgraded from the October poll.

The U.S. economy, the world's largest, is expected to grow an average of 2.3% this year, faster than the 1.8% and 2.0% expected in October and one year ago, respectively.

Unexpectedly strong growth data for India also led to a sharp upward revision since October. 

Forecasts for the euro zone have been unusually benign over the past few months, with growth, inflation and interest rates stable for all of 2026. Growth was expected at 1.2% this year, a tad higher than 1.1% in October but the same as this time last year.

Economic growth in China is forecast at 4.5%, up from 4.2% a year ago.

(Other stories from the Reuters global economic poll)

(Polling, analysis and reporting by the Reuters Polls team in Bengaluru and bureaus in Buenos Aires, Cairo, Istanbul, Shanghai, and Tokyo; editing by Ross Finley and Mark Heinrih)