By : Shatha Kalel
Despite rising geopolitical tensions, higher trade barriers, and ongoing uncertainty in financial markets, the global economy continues to show more resilience than expected. Real global GDP is projected to grow by about 3.1 percent in 2025 before slowing slightly to 2.9 percent in 2026. Much of the current stability is being supported by strong investment in new technologies, especially artificial intelligence, which has helped offset some of the drag caused by slower consumer demand and tighter economic conditions.
In the United States, economic momentum remains moderately strong, although new tariffs and restrictions on international trade are beginning to reduce purchasing power and raise goods prices. AI-related investment in software, research, and information technologies has helped support business confidence, while rising stock market values have played a role in sustaining household spending. However, slower immigration has contributed to weaker job growth, and tariffs are expected to push inflation slightly higher through 2026. As a result, US GDP growth is forecast to moderate, even as the Federal Reserve gradually reduces interest rates to stabilize employment conditions.
Globally, economic performance varies considerably by region. In the Euro Area, growth remains uneven, with Southern European economies performing more strongly due to tourism and public investment, while Northern Europe faces headwinds from industrial slowdown and weak export demand. Japan is expected to experience a short-lived lift from new fiscal stimulus, although rising prices may limit the duration of these gains. The United Kingdom continues to show muted growth shaped by low productivity and the effects of a strong currency on exports.
Among major emerging economies, India stands out as the strongest performer. Rising domestic investment and resilient consumer spending continue to support sustained growth. China, however, remains in a delicate position. While exports have been stable, ongoing stress in the real estate market continues to weigh on household confidence and internal demand. In Brazil, high interest rates have slowed consumer and business activity. Russia remains economically restricted due to financial sanctions and lower oil prices, which limit its ability to re-energize domestic production and trade.
Why Growth is Expected to Slow in 2026
The projected slowdown in 2026 reflects the growing impact of trade barriers, tighter global financial conditions, and uncertainty about how rapidly new technologies like AI can translate into widely shared productivity gains. If business confidence weakens or AI investment fails to meet expectations in the short term, the underlying effects of high tariffs and slowing global demand could surface more sharply. This suggests that the resilience observed today is real but remains fragile.
Conclusion
The global economy is navigating a complex combination of opportunities and risks. Technological innovation is providing new sources of growth, but trade tensions, inflationary pressures, and structural weaknesses in several regions continue to shape the outlook. The ability of countries to achieve durable growth will depend on maintaining policy stability, supporting investment in innovation, and addressing structural challenges such as labor shortages, inequality, and global supply chain fragmentation.
Economic Studies Unit / North America Office
Al-Rabetat Center for Research and Strategic Studies