Economic forecasts 2025-2026: weak growth in Europe

Trade disputes, geopolitical uncertainty, and limited political maneuvering are causing global stagnation. We estimate global growth at only 2.5%. This is the lowest level since the financial crisis of 2008 (excluding recession years). Growth in the European economy will barely exceed 1% in 2025 and 2026 (2025: +1.2%, 2026 +1.1%).

The EU is facing several uncertainties: trade tensions, increased defense spending, rising government bond yields, and delays in the use of NGEU funds (Next Generation EU, a temporary stimulus package worth more than €800 billion aimed at making Europe greener, more digital, and more resilient after the COVID crisis). With the increase in US protectionist measures and the threat of new tariff cycles, the EU's export position is under severe pressure.

Growth divergences within the EU are significant. Germany, traditionally Europe's economic engine, remains stuck at meager growth of +0.1% in 2025 and +1.0% in 2026. However, Germany is emerging from recession. France (2025: +0.6%, 2026: +1.1%) and Italy (2025: +0.6%, 2026: +0.8%) are suffering from weak domestic demand and political instability, while Spain continues to outperform expectations thanks to tourism and the effective use of EU recovery funds (2025: +2.2%, 2026: +1.8%).

The global economy is entering a difficult phase. After years marked by the consequences of pandemics, rising inflation, and geopolitical shocks, the macroeconomic landscape looks fragile for 2025-2026. The United States, despite a brief easing of trade tensions with China, continues to struggle with inflation fueled by high tariffs and a tight labor market. US economic growth is falling back to 1.6% per year, while the budget deficit is approaching an alarming level of 8% of GDP. The Federal Reserve remains cautious for now. Interest rates will not be cut before the end of 2025. US monetary policy therefore remains restrictive for the time being.

China remains one of the main drivers of global economic growth in 2025 and 2026, although the pace of growth is significantly more moderate than in the past decade. We forecast economic growth of 4.5% in 2025, with a slight slowdown to 4.2% in 2026. These forecasts reflect a balancing act on the part of the Chinese government: on the one hand, it is firmly committed to stimulating the domestic economy through fiscal stimulus measures and gradual interest rate cuts, while on the other hand, the Chinese government is trying to prevent the country from becoming too dependent on external demand or a new round of unhealthy credit expansion.

The recent trade truce with the US has temporarily limited the risk of a further deterioration in exports, allowing policy to focus more on domestic consumption. At the same time, the country suffers from structural vulnerabilities that reduce growth potential, such as the ongoing real estate crisis, weak consumer confidence, and demographic aging. China is in the process of shifting from investment-led growth to a more balanced and sustainable growth model, but this transition is fragile and highly dependent on the effectiveness of domestic policy implementation in the coming years.

We are moderately positive about emerging markets, although the situation varies considerably from region to region. India and Vietnam are among the world's fastest-growing economies, with growth rates above 6%. They are benefiting from trade diversion due to the deteriorating economic climate between the US and China. In Latin America, Africa, and parts of Southeast Asia, the picture is more mixed. Some countries, such as Brazil and the Philippines, are making solid progress, while others, such as Colombia, continue to struggle with fiscal risks and political uncertainty.

Given the persistent uncertain environment and limited recovery, global defaults will also continue to rise over the next two years. After a 10% increase in 2024, we expect a 7% increase in 2025 and a 3% increase in 2026. This would mean five consecutive years of rising insolvency rates (2022–2026). At the national and international level, companies are facing increasingly significant payment delays, and the risk of default is rising.