Global Economy Avoids Stagflation but Risks Remain
The global economy has weathered shocks from the Iran conflict better than feared, with a reduced risk of stagflation due to easing energy prices, according to Atradius's latest economic outlook.
The global economy appears to be avoiding a stagflation scenario, despite earlier concerns, according to the latest Atradius Economic Outlook report. Energy price pressures have eased following the ceasefire between Iran and the United States, which has helped anchor inflation expectations. The economic growth continues to be supported by the AI and technology investment boom led by the US.
The report forecasts global GDP growth to slow to 2.4% in 2026, down from 3.0% in 2025, before recovering to 3.1% in 2027. The war in Iran and the closure of the Strait of Hormuz initially caused a mild stagflation shock through increased energy and fertilizer prices. This has been partially offset by the AI boom, a less severe trade war, and ongoing fiscal support.
Advanced economies are set for slower growth, projected at 1.5% in 2026, recovering to 2.0% in 2027. The US remains the strongest performer, although growth is becoming more concentrated. The Eurozone faces greater exposure to imported energy and manufacturing competitiveness challenges.
Emerging market economies continue to be the primary source of global growth, albeit with weaker momentum. The primary downside risk to the outlook remains a re-escalation of the US-Iran conflict. Renewed fighting and a prolonged closure of the Strait of Hormuz could lead to renewed energy price spikes and significantly slow global growth.