World economic growth is expected to remain stable this year as long as the current spike in oil prices is not prolonged, according to the latest Global Economic Outlook from Fitch Ratings.
The ratings agency projects a slight slowdown in global growth to 2.6 percent in 2026, down from 2.7 percent last year, but higher than the 2.4 percent it predicted in December.
The world economy has remained resilient despite a series of geopolitical tensions and policy shifts in the United States. Surging investment in artificial intelligence, significant fiscal deficits in both the U.S. and China and a boost in US consumption driven by stock market gains helped offset the impact of higher tariffs last year.
Fitch Ratings anticipates US consumption will slow in 2026 as a cooling labor market weighs on household income. However, the US fiscal deficit is widening once again. The agency forecasts US GDP growth at 2.2 percent for 2026, which is an upward revision from its 2 percent forecast in January and consistent with last year’s performance.
Eurozone growth is projected at 1.3 percent, which is slightly below the previous year. While higher energy prices present a new obstacle, underlying growth trends are improving as Germany begins to recover due to fiscal easing. Excluding Ireland, where growth has been volatile, the eurozone is expected to see a 0.3 percentage point increase to 1.3 percent.
China is expected to see a slowdown to 4.3 percent from 5 percent in 2025 as consumer spending weakens and export growth cools. Fitch Ratings predicts a mild recovery in capital expenditure after 2025 saw the first annual decline in investment since 1990. The agency raised its GDP growth forecast for China by 0.2 percentage points since December.
Fitch Ratings increased its 2026 annual average oil price forecast to $70 a barrel from $63. This assumes the Strait of Hormuz remains closed for approximately one month before prices fall to the mid-60 dollar range by the second half of the year.
The agency warned that an adverse scenario where oil prices rise to $100 per barrel and remain at that level would cause a significant global supply shock. Such an event would reduce world GDP by 0.4 percent after fourth quarters and add between 1.2 and 1.5 percentage points to inflation in Europe and the US.
Regarding trade policy, the US Supreme Court’s cancellation of IEEPA tariffs has created new uncertainty. However, Fitch Ratings noted that a temporary Section 122 tariff at 15 percent would leave the overall U.S. Effective Tariff Rate at 11.3 percent, which is close to its December assumptions.
World trade picked up in 2025 despite rising US tariffs, partly because of the high import intensity of IT investment and the geographic concentration of semiconductor manufacturing. In China, rising domestic savings and falling investment have pushed private-sector net lending to a historical high of more than 11 percent of GDP, leaving growth dependent on exports and fiscal support.
Signs of recovery are emerging in other major economies as well. Final domestic demand in Germany grew by 0.8 percent in the fourth quarter of 2025, the fastest rate since early 2022. In Japan, there are increasing signs the economy has entered a sustained reflation phase.
A cooling labor market and slowing wage growth will likely lead the U.S. Federal Reserve to cut interest rates twice in 2026. The Atlanta Fed Wage Growth Tracker fell to 3.6 percent in January, the lowest rate since June 2021. While hiring remains weak, a slowdown in labor supply is preventing a sharp rise in the unemployment rate.
