Global GDP projected to increase 2.8% in 2026: Goldman Sachs Research

Global GDP is projected to increase by 2.8 per cent in 2026 compared to the consensus forecast of 2.5 per cent.

US economic growth is expected to accelerate to 2.6 per cent, while China’s GDP is likely to expand at 4.8 per cent as strong exports outweigh sluggish domestic demand.

Despite longer-term challenges, Goldman Sachs economists predict the euro area economy will increase by 1.3 per cent owing to fiscal stimulus in Germany and strong growth in Spain.

The United States is expected to substantially outperform consensus estimates because of tax cuts, easier financial conditions and a reduced drag on the economy from tariffs.

The impulse from these forces is expected to be front-loaded in the first half of 2026, and the rebound from the US government shutdown will also provide a boost. “We expect especially strong GDP growth in the first half of next year,” Jan Hatzius, chief economist and head of Goldman Sachs Research, wrote in the team’s report titled ‘Macro Outlook 2026: Sturdy Growth, Stagnant Jobs, Stable Prices’.

However, the rise in global GDP hasn’t resulted in stronger performance from the labour market. Job growth across all major developed-market economies has now fallen well below the rates prevailing in 2019, just prior to the pandemic.

Although it doesn’t provide the full explanation, the job-market weakness mirrors the sharp downturn in immigration and, in turn, labour force growth, Hatzius wrote. The disconnect in employment is most pronounced in the United States, where job growth may well have been negative over the summer.

The impact of artificial intelligence (AI) on jobs and productivity, meanwhile, has so far mainly been confined to the technology sector, according to Goldman Sachs Research. Its economists expect that the largest productivity benefits from AI are still a few years off.

The narrative for China’s economy is much more mixed. China’s ability to produce increasingly higher quality goods at lower prices remains unmatched, Hatzius wrote. The world’s second-largest economy has demonstrated that it has the capability to deter high tariffs on its exports, as seen in recent trade negotiations with the United States.

“All this suggests that the Chinese manufacturing sector should continue to grow robustly,” Hatzius wrote.

At the same time, large parts of China’s domestic economy remain weak. “The combination of a strong manufacturing sector and weak domestic demand is pushing China’s current account surplus ever higher,” Hatzius wrote.

Goldman Sachs economists expect China’s current account surplus to increase to almost 1 per cent of global GDP over the next three to five years, the biggest surplus of any country in recorded history. “This is likely to weigh heavily on growth in economies that compete intensively with China such as the euro area, and particularly Germany,” Hatzius wrote.

Increased competition from China reinforces the structural weaknesses of the euro area economy, including demographic decline, overregulation and high energy costs, according to Goldman Sachs Research.

Despite these challenges, the euro area should grow at a ‘decent’ 1.3 per cent pace in 2026, Hatzius wrote. GDP growth in Germany is expected to benefit from the sharp increase in federal government spending that is underway.

The economists expect growth in Southern Europe to remain solid, especially in Spain where real consumer spending has continued to grow at around 3 per cent and the economy’s diversification into higher value-added services continues apace.

Core inflation in developed markets is expected to fall to levels that are broadly consistent with policy targets in 2026.

ALCHEMPro News Desk (DS)