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Economic insights

December 9, 2025

 

Global economy projected to see ‘continued expansion' in 2026

The Economic Outlook 2026 report looks into trade shifts, AI and small business.

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Ben Fox Rubin

Vice President,

Global Communications,

Mastercard

Global real gross domestic product growth is expected to reach 3.1% in 2026, a tick down from the currently estimated 3.2% in 2025, according to new projections released by the Mastercard Economics Institute on Tuesday in its new Economic Outlook 2026 report.

“The overall story is one of continued, but divergent, expansion in the global economy,” said Michelle Meyer, Mastercard’s chief economist.

Beyond that global figure, the underlying dynamics driving that number present a lot of nuances. Meyer described those dynamics in this way: Where 2025 has been all about big headlines — inflation worries, new tariff policies, tax cuts, AI development — 2026 will be about the results, both good and bad, of those headlines impacting the global economy in a much more transparent way.

While there is still plenty of market uncertainty, Meyer said the global economy should remain resilient. That strength will be bolstered by continued AI investments, interest rate cuts and government stimulus, which will all support GDP growth in 2026.

The annual Economic Outlook report delves into three major trends going into 2026: global trade realignment, spending on AI and small businesses adapting to macro changes.

 

3.1%

2026 global real GDP growth, down from 3.2% in 2025

3.4%

2026 global inflation, down from 3.9% in 2025

2.2%

2026 U.S. GDP growth, up from 2% in 2025

Shifting trade relationships

The 2026 economic story will largely be told by the world’s two biggest economies, the U.S. and China.

Trade tensions between the two countries escalated in 2025 after the U.S. raised tariffs on Chinese imports in the spring.

For China, the new report expects GDP growth of 4.5% in 2026, down from 4.8% in 2025, due in part to lower U.S. demand for Chinese goods. China has been working to grow its relationship with emerging markets to offset that lower demand.

For the U.S., the new report expects GDP growth to accelerate to 2.2% in 2026, from 2% in 2025. That increase will be driven by several factors, including new tax cuts supporting R&D and manufacturing spending.

Despite strong economic growth in recent years, consumer sentiment has largely remained low since the pandemic, as many Americans remain concerned about higher prices and a shifting jobs market. Meyer said it is possible that those dynamics will continue as inflation and labor market fluctuations remain a major storyline in 2026.

 

AI and fiscal investments

AI adoption and spending are expected to keep going in 2026, along with notable increases in government spending — from China’s smart cities and high-speed rail projects to Germany’s huge increase in spending for defense and green tech.

AI adoption is strongest so far in the U.S. and Denmark, according to the report’s new MEI AI Enthusiasm Index.

The report notes that while all this spending is expected to fuel global growth, there are risks worth monitoring, as “in some instances excessive spending could prompt an overheating of the economy, fueling inflation and undermining debt sustainability.”

 

Global economy projected to see ‘continued expansion' in 2026

In many sectors, small and medium-sized businesses have been disproportionately impacted by tariffs in the U.S. when compared with larger businesses, which are able to shift their supply chains and front-load inventory.

Looking ahead to 2026, the Mastercard Economics Institute expects small businesses to sharpen their competitive edge, cut costs and streamline their operations, thanks to greater access and adoption of tech tools. For instance, the institute found that 44% of new card-accepting U.S. businesses were online-only in 2024, up 20 percentage points since 2019, indicating a huge increase in digitally native businesses.

Looking ahead with the Mastercard Economics Institute

In 2026, the policy changes that grabbed headlines in 2025 will exert their force on economies around the world. Staying alert to the data to catch real-time shifts has never been more crucial.

Read the report
Decorative