The global economy is proving more resilient than expected to the shock of rising energy prices. Fitch Ratings has upgraded its forecast for 2026 global growth to 2.6%, a 0.2 point increase from its previous estimate. This upgrade comes as a surprise given the ongoing energy price surge. According to Fitch, the main drivers of this resilience are consumers continuing to spend and the rapid growth of investments in artificial intelligence (AI) worldwide.
The United States is leading the way, with expected growth rates of 2.1% in both 2026 and 2027. Europe is also showing signs of improvement, with Germany, which has been stagnant for three years, posting 1% growth in the second quarter. In Asia, South Korea is benefiting from strong demand for technology, India is growing steadily, and Japan and Mexico are also seeing positive effects. However, China is a notable exception, with its growth forecast reduced to 4.5% due to sluggish investment and cautious households.
Despite the upgraded forecast, concerns remain about the impact of high energy prices on inflation. Fitch expects the US Federal Reserve to raise interest rates again in December, followed by a maintained rate of 4.25% in 2027. The European Central Bank is also anticipated to take action as early as October. A return to lower inflation is not expected until 2027, provided that oil prices drop to around $70 per barrel.
The growth of AI is a double-edged sword for the global economy. While it is driving investments and growth, it also poses risks. If the valuations of AI companies were to correct sharply, investments could slow down, potentially dragging economic activity down with them. This makes AI a key area of vigilance for economists and policymakers.
The global economic landscape is complex, with various factors at play. The ongoing energy price shock is a significant challenge, but the resilience shown so far is a positive sign. The growth forecasts for major economies are generally positive, but there are also risks and uncertainties that need to be monitored closely.
In related news, various sectors and countries are taking steps to address energy and economic challenges. For instance, Tataouine is investing in a solar power plant with a capacity of 120 MW, worth €80 million. Additionally, there are concerns about potential market fluctuations, with Morgan Stanley warning of a possible 7% drop in the S&P 500.
The global economy faces a delicate balance between growth and inflation. While the current forecast is positive, it is contingent on various factors, including the development of AI and the trajectory of energy prices. Policymakers and economists will need to remain vigilant and adapt to changing circumstances to ensure sustained growth and stability.
Key points
- Fitch Ratings has upgraded its 2026 global growth forecast to 2.6% despite soaring energy prices.
- The US and Europe are showing resilience, with the US expected to grow at 2.1% in 2026 and 2027, and Germany posting 1% growth in the second quarter.
- Risks remain, including the potential for AI-related market corrections and ongoing inflation concerns.
