Fitch Lifts 2026 Outlook, Warns on Oil Shock
Global economic growth is expected to remain broadly stable in 2026, provided the recent spike in oil prices does not persist, Fitch Ratings said in its March 2026 Global Economic Outlook (GEO).Fitch revised up its 2026 average oil price forecast to USD 70 per barrel from USD 63. The estimate assumes the Strait of Hormuz remains effectively closed for roughly a month before prices ease to the mid‐USD 60s in the second half of 2026. This adjustment has not significantly altered the agency's baseline economic projections.However, Fitch warned that a more severe scenario, where oil stabilizes at USD 100 per barrel, would deliver a major global supply shock. Under such conditions, world GDP would fall by 0.4% after four quarters, while inflation would rise by 1.2 to 1.5 percentage points in both Europe and the US.According to Fitch, the world economy demonstrated notable resilience in 2025 despite a series of geopolitical disruptions and unexpected shifts in US policy.Global growth reached 2.7% last year, close to the long‐run average. Assuming the current oil price shock proves temporary, Fitch projects only a slight easing in 2026 to 2.6%, an upward revision from the 2.4% forecast issued in December.The ratings agency noted that a surge in AI‐related investment, widening fiscal deficits in both the US and China, and a boost to US household spending driven by equity market gains all helped cushion the impact of higher US tariffs in 2025.While US consumption is expected to cool this year due to labour market weakness, the fiscal deficit is expanding again. Fitch now forecasts US GDP growth at 2.2% for 2026, an upgrade from its January projection of 2% and unchanged from last year.In the eurozone, Fitch expects growth to hold at 1.3% in 2026, the same as in its December outlook. Although energy prices pose a fresh challenge, underlying conditions are improving, particularly as Germany begins to recover amid fiscal easing. When excluding Ireland, whose figures have been volatility‐prone, eurozone growth is estimated to pick up by 0.3 percentage points to reach 1.3%.China's economy, meanwhile, is forecast to slow to 4.3% in 2026 from 5% in 2025, as consumer spending and export growth soften. A slight recovery in capital expenditure is anticipated following the first annual decline in investment since 1990. Fitch has raised its 2026 China growth forecast by 0.2 percentage points from December.The US Supreme Court's cancellation of IEEPA tariffs has reintroduced uncertainty surrounding US trade policy. Nevertheless, Fitch said a temporary Section 122 tariff at 15% would keep the overall US Effective Tariff Rate at 11.3%, similar to the assumption used in December.Despite a sharp rise in the US tariff rate, global trade strengthened in 2025. Fitch attributes this partly to the high import intensity of IT investment, especially given the geographic concentration of semiconductor production.In China, rising household savings and declining investment have pushed private‐sector net lending to more than 11% of GDP, an all‐time high. Fitch said this leaves China's growth increasingly dependent on exports and fiscal support, reinforcing ongoing deflationary pressure.
