Global economic growth may be similar in 2026 to that recorded in 2025 (3.1%). However, from cyclical perspective we believe that a turning point toward a moderate recovery could occur over the course of the next year. In any case, 2027 will still show a mild expansion (3.2%), well below the historical average of 3.7% observed since the beginning of the century and up to the Covid-19 pandemic.

This growth rate remains insufficient to address the enormous challenges ahead. To put it in perspective: losing half a percentage point of global GDP growth implies USD 10 trillion less over just 5 years — equivalent to the combined nominal GDP of Germany and Japan, the world´s third and four largest economies.

Geopolitical uncertainty and volatility remain powerful constraints on growth. Structural trends, such as the gradual reduction of the working-age population due to ageing, will also slow global growth in the mid-term. The world population growth rate has fallen from 2% annually to below 1% in just half a century. China’s slowdown is another major factor: as its economy matures, growth will likely ease from around 8% annually 10 years ago to about 4% in the years ahead. Neither of these traditional growth engines’ will be available in the future. The key question is: how can the world replace these engines and reignite global growth?

As Giuseppe Tomasi di Lampedusa wrote in The Leopard: “If we want things to stay as they are, everything must change”. Today, a large share of humanity enjoys the highest living standards in history. Yet what got us here will not necessarily take us forward over the next 10 to 20 years. The current global growth outlook is among the weakest in many years. None of the world’s challenges that lie ahead can be solved without concrete actions and consensus on how to ‘reset’ the global growth model. A possible roadmap would be to ‘replace’ the previous drivers with three new growth engines’ for the coming decades:

1. Re-globalising the world’: Geopolitical fragmentation risks leading the world into a less efficient equilibrium. Reversing this requires incentives that generate winwin dynamics, strengthen multilateralism, and reinforce global governance. The world must ‘new globalise’ on more stable and solid foundations.
   
   
2. A productivity revolution: Transformative technologies, led by AI, could help reverse the economic growth slowdown. This also requires structural reforms to labour markets and education, alongside major investments in re-skilling the workforce and better allocation of resources. According to the IMF, AI-induced productivity gains could lift global GDP by up to 4 percent over the next decade¹ (see Special topic: “The macroeconomic effects of artificial intelligence”).
   
   
3. Growth-boosting smart regulation: Designed to unlock financing and stimulate investment. Weak capital accumulation has led to a sharp decline in real investment since the 2008 crisis. Recovery after this year was modest, investment contracted again during the pandemic, and aggregate real investment today remains around 20% below trend in advanced economies and around 30% below in emerging markets.²  Reigniting investment is essential: Europe alone requires an additional EUR 800 billion per year to regain competitiveness.³ This demands a regulatory and financing framework that fosters growth and balances financial stability with pro-growth incentives. Evidence increasingly confirms the close link between high-quality regulation and productivity growth (see Special topic: “Regulation and productivity: In search of the optimal balance”).

Resetting global growth requires building consensus to reverse economic fragmentation, designing smarter regulations, and accelerating technology adoption to raise productivity. Additionally, in several regions and countries, addressing fiscal imbalance is key to tackling persistent public deficits and stabilising debt ratios.

The world has experienced two major disruptive exogenous shocks in recent years: first, the Covid-19 pandemic in 2020, and second, Russia’s invasion of Ukraine in 2022. Together, these events strained global value chains and triggered the highest inflation rates in four decades across most regions. The joint action of central banks — in 2022, a record eight out of ten raised interest rates simultaneously — helped bring inflation back close to pre-crisis levels within two years. This was achieved through a ‘soft landing’, with only a moderate negative impact on economic activity. A key feature of this was the resilience of labour markets worldwide. Unemployment rates proved highly resistant to increases, even during the economic slowdown, which was crucial in sustaining growth despite higher interest rates over the past few years.

Today, most central banks have either completed or are close to completing their interest rate-cutting cycles. However, terminal rates remain significantly higher than in the previous decade. These new equilibrium levels of interest rates appear compatible with today’s low unemployment rates (see Special topic: “The ‘equilibrium’ interest rate: A review of the main drivers”). In many cases, jobless rates are at or near historical lows, as seen in the euro area, the United States, the United Kingdom, Poland, Brazil and Mexico — among countries where Santander operates. This resilience also provides central banks with greater room for manoeuvre should they need to tighten policy again to keep inflation under control in the future.

1. International Monetary Fund, World Economic Outlook (October, 2025), 'Global Economy in Flux, Prospects Remain Dim', Washington DC.
2. Organisation for Economic Co-operation and Development (2025), ‘OECD Economic Outlook, Volume 2025 Issue 1: Tackling Uncertainty, Reviving Growth, Paris, 2025
3. Draghi, M. (2024). ‘The future of European competitiveness: Report for the European Commission’. Brussels: European Commission.

With interest rates declining and nearing their floor in many countries and regions, the global economic cycle should accelerate growth going forward. However, as we have anticipated, forecasts point to only a mild hastening over the next two to three years and at a different pace by region. Common factors — such as uncertainty surrounding the global geopolitical situation and worsening fiscal imbalances — are acting as headwinds to growth. These come on top of the structural trends already noted, including population ageing globally and China’s economic slowdown.

On the other hand, certain factors could push growth above current projections. For instance, a faster-than-expected de-escalation of ongoing armed conflicts, coupled with strengthened global coordination and multilateralism, would provide upside momentum. Similarly, a more rapid and widespread adoption of AI than currently anticipated would boost productivity and economic growth. According to the IMF, a marked decline in global economic policy uncertainty — stemming from clearer and more stable bilateral and multilateral trade agreements — could raise global output by around 0.4%. Reducing tariffs within these agreements would add roughly another 0.3% to growth. In addition productivity gains from artificial intelligence could further increase global output by about 0.4% in the near term.

Global markets are perhaps the clearest reflection of the dichotomous economic scenario at present, in which stock markets at record highs (usually associated with periods of economic expansion) coexist with traditional safe-haven assets such as gold (also at record levels). This unusual asset dynamic highlights the complexity of today’s environment. Historically, equities and gold have thrived under opposing conditions, but since late 2023 both have reached record highs simultaneously. This rare occurrence reflects the dual nature of the current cycle: optimism about growth and productivity (driven mainly by the optimism about AI and expectations of monetary policy easing), and heightened demand for safe-haven assets amid geopolitical risks. Meanwhile, the emergence of technological innovations in finance — such as stablecoins, which have expanded rapidly over a short period — deserves further analysis and understanding.