Global growth seen steady in 2026 if oil shock fades, Fitch says

Global economic growth is expected to remain broadly steady this year provided the recent surge in oil prices proves temporary, Fitch Ratings said in its March 2026 Global Economic Outlook.

The ratings agency said the global economy has remained resilient despite geopolitical tensions and policy shocks in the United States.

World economic growth reached 2.7% last year, close to its long-term average, and is projected to slow only slightly to 2.6% in 2026, Fitch said. The forecast was revised up from 2.4% in the agency’s December outlook.

Oil prices and global risks

Fitch raised its forecast for the average Brent crude price in 2026 to $70 per barrel from $63, assuming the Strait of Hormuz remains effectively closed for about a month before prices fall back to the mid-$60 range in the second half of the year.

The revision has not significantly altered the agency’s base-case global growth projections.

However, Fitch warned that a more severe scenario in which oil prices rise to $100 per barrel and remain at that level would represent a major supply shock.

Such a scenario could reduce global GDP by about 0.4% after four quarters and increase inflation in Europe and the United States by between 1.2 and 1.5 percentage points.

Regional outlook

Fitch forecasts U.S. economic growth of 2.2% in 2026, revised up from a previous estimate of 2%, and unchanged from last year.

Strong investment related to artificial intelligence, large fiscal deficits in the United States and China, and higher U.S. consumer spending supported by equity market gains helped offset the impact of higher tariffs last year, the agency said.

Fitch expects U.S. consumption to slow in 2026 as a weaker labor market weighs on household income, although the federal fiscal deficit is widening again.

Eurozone growth is projected at 1.3%, unchanged from the December forecast and slightly below last year. Fitch said higher energy prices pose a new headwind, but underlying growth trends are improving as Germany begins to recover amid fiscal easing.

China’s economy is expected to slow to 4.3% in 2026 from 5% last year as consumer spending growth weakens and export growth cools. However, Fitch anticipates a modest recovery in capital spending after investment declined in 2025 for the first time since 1990.

Trade, inflation and monetary policy

The U.S. Supreme Court’s cancellation of tariffs imposed under the International Emergency Economic Powers Act has created renewed uncertainty around U.S. trade policy, Fitch said. However, a temporary 15% tariff under Section 122 of the Trade Act of 1974 would leave the U.S. effective tariff rate at 11.3%, close to Fitch’s previous assumptions.

Global trade expanded in 2025 despite the increase in U.S. tariffs, partly reflecting the strong import demand associated with information technology investment and the geographic concentration of semiconductor manufacturing.

Fitch also noted that rising domestic savings and falling investment in China have pushed private-sector net lending to more than 11% of GDP, leaving economic growth increasingly reliant on exports and fiscal stimulus.

In Europe, Germany’s domestic demand showed signs of recovery, with final domestic demand growing 0.8% in the fourth quarter of 2025, the fastest pace since early 2022.

Japan’s economy is also showing signs of entering a sustained reflation phase, the agency said.

Fitch expects the U.S. Federal Reserve to cut interest rates twice in 2026 as labor market conditions soften.

“A cooling labor market and slowing wage growth is likely to persuade the U.S. Federal Reserve to cut rates twice in 2026,” Fitch said, noting that the Atlanta Fed Wage Growth Tracker fell to 3.6% in January, its lowest level since June 2021.