2026 Mid-term Global Economic Outlook: Fragmentation under Supply Shocks, AI Opportunities, and Regional Divergence

Supply Shocks and Slowing Growth Geopolitical conflicts, the intensification of trade protectionism, and volatility in energy and critical minerals are significantly increasing the cost of global growth and weakening economic efficiency. This 'supply shock' is not a single event but is compounded by factors such as geopolitics, tariff barriers, industrial policies, and energy security concerns, all of which are pushing up operating costs and posing a continuous constraint on medium- to long-term growth potential.

Forecasts indicate that the global economic growth rate will slow in 2026, decreasing from 3.4% in 2025 to 2.9%, and is expected to rebound to 3.2% in 2027. This adjustment in growth rate is not a simple signal of recession but rather a profound paradigm shift in the economic structure—the old, high-efficiency growth model is being replaced by a more complex, cost-driven new landscape.

Sharp Regional Divergence Economic resilience is not evenly distributed. Developed economies show clear differentiation. The US economy has maintained resilience, supported by AI-driven capital expenditure and affluent consumption, but its growth drivers are increasingly concentrated in a few sectors. The Eurozone, however, faces further pressure on growth expectations due to geopolitical conflicts and external demand, with industrial competitiveness constrained by global trade policies.

Emerging markets exhibit more pronounced regional divergence. India maintains a rapid growth trajectory, supported by strong domestic demand and infrastructure investment, and benefits from the easing of some trade barriers. On the other hand, China faces a superposition of structural challenges, including deep adjustments in the real estate sector, demographic changes, slowing labor productivity growth, and cyclical energy price shocks, all of which constrain its short-term growth prospects.

Technology-Driven Structural Opportunities and Bottlenecks The wave of Artificial Intelligence (AI) is a key structural variable in the current economic landscape. AI investment is becoming a crucial pillar supporting capital expenditure and productivity enhancement in developed economies, especially the US, providing a structural counterforce to the economy. However, the penetration of AI is not without risk; it also brings new bottlenecks: new price increases and resource constraints are being triggered in key AI input areas such as semiconductors, data centers, and energy.Inflation and Monetary Policy Complexity The drivers of global inflation are becoming more structural, shifting from supply chain excesses to deeper cost-push pressures. We anticipate inflation to rise in 2026 and only gradually ease in 2027, reflecting the supply-driven nature of inflation. Against this backdrop, the monetary policy choices of major central banks face unprecedented fragmentation. Under inflationary pressure, the fiscal deficits and debt servicing costs faced by different economies vary significantly, testing the coordination and effectiveness of the global financial system.

Long-Term Risk Forecast Looking ahead, structural economic restructuring is an irreversible trend. The core conflict in the future will be: on one hand, the trade-off between the productivity gains potential brought by AI and the efficiency losses from geopolitical and trade fragmentation; on the other hand, how to manage growing fiscal deficits and debt risks while ensuring that regional economies do not fall into deeper structural divisions. The flow of global capital will continue to be driven by policy uncertainty and geopolitical risks, and the reorganization of regional supply chains will become a core strategic issue for businesses.