- Sluggish growth and high government debt are expected to define the 2026 global economic landscape.
- Deloitte forecasts a continuation of geopolitical competition and economic stress impacting major markets.
- The US is projected to maintain robust growth, while the EU and UK lag behind benchmark rates.
- Adoption of artificial intelligence will have a delayed impact on productivity and employment.
Sluggish Growth Ahead
CoStar reports that according to Deloitte’s latest forecast, 2026 will echo the underwhelming economic momentum of 2025. Western markets, particularly the US, UK, and EU, are expected to show lackluster GDP growth as persistent high debt burdens and cautious fiscal policies take their toll.
Ian Stewart, Deloitte’s UK chief economist, noted that government debt remains elevated, with US deficits at historic highs. Most countries are contending with sizeable budget gaps, reinforcing ongoing concerns about fiscal sustainability.
Debt and Deficits in Focus
High government debt is expected to persist through the decade. The US national debt hit $37T in 2025 and is forecast to keep rising. In the UK, a £22B public finance gap underscores continued fiscal strain. The EU faces similar pressures as member states grapple with slow growth, aging populations, and subdued productivity.
Policymakers are expected to manage these pressures without significant expenditure cuts, particularly in welfare and social programs, limiting their options for stimulating faster economic expansion.
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Competing for Growth
Competition among global powers is set to intensify, with heightened trade tensions and regulatory divergence likely. The US is expected to post solid growth, buoyed by fiscal stimulus and improved productivity, while Europe aims to emulate less-regulated US models to spur risk-taking and investment. However, Europe’s largest economy, Germany, remains a drag, with GDP gains predicted at just 0.9% for 2026.
The UK is projected to grow by 1.3%, while India’s GDP could reach 6.2% and China’s 4.2%. Yet, overall Western economic progress remains subdued, well below rates seen during previous periods of globalization. Recent survey data has also pointed to uneven momentum across US commercial real estate sectors, reinforcing concerns about a patchy recovery and underwhelming growth at the regional level.
AI Integration Remains Slow
Artificial intelligence continues to be seen as a potential catalyst for growth, but Deloitte cautions that widespread benefits and productivity gains are unlikely to materialize before the end of 2026. Most economies will spend the year embedding AI, with employment patterns and impacts just beginning to emerge.
There are also risks tied to AI: sector overvaluation, dominance of US tech equities, rising use of debt for tech expansion, and geopolitical tensions around ownership and regulation. Nevertheless, robust regulation and profitable core businesses temper systemic risks.
Demographic and Labor Pressures
Immigration policy and aging populations continue to weigh on workforce dynamics and growth prospects. Even traditionally left-leaning governments are tightening immigration controls, aiming to balance domestic political pressures and demographic realities. These long-term issues remain unresolved and constrain growth expectations for major economies in 2026.
