Global Economic Outlook: April 2026

Negotiations to end the conflict in the Middle East are ongoing, but the economic impacts will be felt for some time yet. The outlook, and the duration of the related economic disruptions, remain highly uncertain.

As the cut-off point for March’s round of energy assumptions was early in the conflict, we factored in limited disruptions and price impacts. But our April assumptions, which are consistent with S&P Global Energy’s current base case, incorporate extended disruptions and higher prices. Assumptions for other energy prices, including gas, have also been adjusted in line with S&P Global Energy’s projections.

Consistent with higher energy price assumptions, we have raised our consumer price inflation forecasts. This primarily reflects the direct effects of higher energy prices, but also some signs of broadening price pressures. These include higher materials prices, supply chain disruptions and lengthening delivery times, and higher shipping and insurance costs. Core consumer price inflation forecasts have been raised accordingly, although to a lesser extent than headline rates.

The magnitude of the upward revisions to our national inflation forecasts varies. This reflects differences in various influences, including energy weights in consumer price indexes and the fiscal space available to mitigate the effects of higher energy prices. Differences in demand conditions also affect businesses’ ability to pass on the substantial increases in input costs evident in S&P Global’s Purchasing Managers Index (PMI®) data for March. 

Central bank responses to the energy shock are likely to vary. A “textbook” monetary policy response to a rise in headline inflation driven by a short-lived energy supply shock would be to “look through” it. Consistent with this, we did not make material changes to our forecasts for the major central banks in March.

Some of our monetary policy forecasts have subsequently changed, however, to reflect our higher energy price assumptions and the rising risk of broader price pressures. We now expect a (modest) rise in policy rates by the European Central Bank during the second quarter. Also, the rate cuts that we previously expected from the US Federal Reserve and the Bank of England this year have been pushed back to 2027. Currency weakness in some emerging economies also results in earlier tightening than previously forecast, India included. 

We have cut our real GDP growth forecasts for 2026 in most major economies. Higher inflation squeezes household real incomes, while consumer confidence is tumbling, from already low levels in many economies. Fiscal support and lower household savings can cushion some of the adverse effects on consumer spending, but high uncertainty is likely to constrain the latter.

Rising inflation will also lead to less accommodative global financial conditions which will have broader negative effects on demand. These factors will weigh on business investment, along with high uncertainty and lower corporate profits (via squeezed margins). Weaker aggregate global demand means weaker trade flows. 

All things considered, our annual global real GDP growth forecast for 2026 has been cut by half a percentage point since February, to 2.4%. Excluding 2020’s pandemic-driven plunge, this would be the weakest growth rate since 2009.     

The downward revisions to our national and regional growth forecasts differ in scale. The Middle East has suffered the largest reductions. Elsewhere, the variations in the magnitude of the revisions reflect differences in some key near-term growth drivers. These include reliance on energy supplies from the Gulf, energy mix, availability of strategic reserves and policy responses, including fiscal support.

Many of Asia-Pacific’s economies are major net energy importers, heavily reliant on oil and gas supplies from the Gulf and relatively sensitive to swings in global demand. Some of Western Europe’s largest economies are vulnerable for similar reasons, with many struggling to generate any growth momentum even before the conflict. 

April’s “flash” PMIs® are likely to show similar trends to those in March. Soaring input price indexes and lengthening suppliers’ delivery times in March signaled rising price pressures, for goods particularly. Lower output and new orders indexes were indicative of lower growth rates, while the deterioration in surveys of expected future activity pointed to more weakness ahead.

“Flash” PMI® data for April will be released on April 23. 

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.