(21 September 2026 – Global) The global economy is proving more resilient than forecast as it withstands the wide reaching energy-price shock resulting from the US-Iran War.
The AI investment boom is supporting growth while consumer and business confidence remain robust. Economic activity has also held up more strongly than expected across the eurozone and emerging markets, leading Fitch Ratings to raise its 2026 world growth forecast to 2.6 percent from 2.4 percent in Q2 2026.
World growth forecasts are unchanged for 2027 and 2028 at 2.5 percent and 2.6 percent, respectively, narrowly below the long term historical trend.
Fitch lowered its China 2026 growth forecast to 4.5 percent despite stronger global growth. Domestic demand indicators have weakened again recently with fixed asset investment falling and the housing slump deepening. Chinese retail sales and credit growth is also sluggish as the household sector faces
deleveraging pressures. Fiscal support to growth has been modest with resurgent export growth offsetting domestic weakness.
“We have seen a big shift in the outlook for real policy interest rates over the next couple of years as a more hawkish chair takes the helm at the Fed, and central banks strive to ensure we do not see the sort of second-round effects from input cost shocks that played out after pandemic” commented Fitch Ratings Chief Economist, Brian Coulton.
“Upward revisions to our world growth forecasts have been accompanied by substantial increases in our global interest rate projections. We expect the Fed to hold rates in 2027, which would leave rates at the end of next year a full 125bp higher than we were forecasting in June.”
“We expect bond yields to edge down a bit from the five percent rate seen in recent weeks as oil prices fall back, but they will remain well above the levels seen before the US-Iran war. Our higher global interest rate projections have not generally been accompanied by increases in our inflation forecasts, highlighting that the expectation is for higher real rates.”