Fitch Ratings has raised its global economic growth forecast for 2026 to 2.6%, an upward revision of 0.2 percentage points, as resilient consumer spending and strong artificial intelligence (AI) investment help economies withstand the global energy price shock.
In its latest Global Economic Outlook, the ratings agency said global growth is expected to slow only marginally from 2025 and remain close to its long-term trend, despite elevated energy prices and rising real interest rates.
However, Fitch cautioned that a shift towards tighter monetary policy, particularly in the United States, could present challenges for global economic activity over the next two years.
Fitch revised its US economic growth forecasts upwards by 0.2 percentage points to 2.1% for both 2026 and 2027.
The upgrade reflects continued resilience in consumer spending despite slower real household income growth, alongside sustained capital expenditure on AI infrastructure.
The ratings agency said the AI investment boom shows no signs of slowing, providing support for US economic activity and technology-related industries globally.
The eurozone has also demonstrated resilience, prompting Fitch to raise its growth forecasts slightly. Germany’s economy expanded by 1% year-on-year in the second quarter of 2026 following three years of stagnation.
In Asia, South Korea received a substantial upward growth revision as global information technology spending accelerated, benefiting other manufacturing economies including Japan.
India’s economic growth also remains strong.
China, however, faces a different outlook, with Fitch lowering its 2026 growth forecast by 0.1 percentage points to 4.5%.
The agency attributed the downgrade to falling fixed-asset investment and weak household consumption, despite strong export performance.
Fitch said the global monetary policy outlook has shifted significantly, with central banks increasingly focused on preventing elevated energy and input costs from generating persistent inflation.
Under new Federal Reserve Chair Kevin Warsh, Fitch expects the US central bank to raise interest rates again in December before maintaining its policy rate at 4.25% throughout 2027.
This would leave US interest rates at end-2027 a full 125 basis points higher than Fitch’s forecast in its June Global Economic Outlook.
“We have seen a big shift in the outlook for real policy interest rates over the next couple of years as a more hawkish Chair takes the helm at the Fed and central banks strive to ensure we do not see the sort of second-round effects from input cost shocks that played out after pandemic,” said Fitch chief economist Brian Coulton.
The agency also expects the European Central Bank to raise rates once more in October before reversing this year’s increases in 2027, assuming oil prices decline to US$70 per barrel under its baseline forecast.
Meanwhile, the Bank of Japan has accelerated monetary tightening as policymakers respond to inflationary pressures.
Fitch said expectations of higher real interest rates have contributed to rising global bond yields, alongside increased corporate financing activity and the diminishing presence of central banks in bond markets.
Sovereigns with weaker public finances have generally experienced greater pressure in bond markets, while higher borrowing costs are expected to weigh on the US housing sector.
The agency also identified a potential correction in equity markets and a pullback in AI capital expenditure as key risks to global growth.
Although AI investment continues to support the US economy and technology exporters, Fitch warned that elevated equity valuations could increase vulnerability to a market correction.
Persistent inflation also remains a concern, particularly if geopolitical developments keep energy prices elevated.
Fitch said stronger unit profit growth and rising information technology goods prices could sustain US inflationary pressures, potentially prompting faster Federal Reserve rate increases.
Meanwhile, China’s growing export competitiveness could create additional challenges for European manufacturers and economic growth.
The ratings agency expects global economic activity to remain resilient in its baseline outlook, but cautioned that sustained monetary tightening and prolonged energy market disruptions could increasingly weigh on growth in 2027.
