Global Economic Outlook: US, Europe Grow More Slowly Than Expected Amid Trade,

*Changes compared with October 2024’s Global Economic Outlook forecasting. Negative growth rates presented in parentheses. Source: Scope Ratings forecasts, regional and national statistical offices, IMF.

Defence, Infrastructure Spending to Underpin Stronger 2026 Growth in Europe

Scope expects stronger growth in Europe in 2026 as defence spending rises and governments implement measures to increase investment.

Looking ahead, Scope sees four adverse factors weighing on the outlook for the global economy and global credit. First, there are the on-again, off-again escalations and de-escalations of trade tensions posing recessionary risks for the global economy. Secondly, threats are increasing for financial stability amplified by the latest wave of financial deregulation spear headed by the United States.

Another factor is the budgetary challenges that governments face, triggering more frequent market re-appraisals of sovereign debt risks. Finally, there are heightened geopolitical risks, not least Russia’s continuing war in Ukraine and the recent escalation of conflict between Israel and Iran.

The rating agency assumes higher steady-state borrowing rates than the rates that prevailed before the cost-of-living crisis. Many central banks have paused rate reductions, even if the Federal Reserve and Bank of England may resume them later this year whereas the Bank of Japan is gradually increasing rates. Sustained higher borrowing rates and elevated financial-market valuations amid financial deregulation threaten corrections and present risks for financial stability and global credit conditions.

Presentation: Scope’s 2025 mid-year economic and credit outlook

Data: Scope’s mid-year 2025 economic projections

For a look at all of today’s economic events, check out our economic calendar.

Dennis Shen is the Chair of the Macro Economic Council and Lead Global Economist of Scope Group. The rating agency’s Macroeconomic Council brings together the company’s credit opinions from multiple issuer classes: sovereign and public sector, financial institutions, corporates, structured finance and project finance.