Another Year Of Resilience: 3 Calls For The Global Economy In 2027

(MENAFN- ING) ING's base call: All will be good

The list of potential downside risks is long, but the global economy will enjoy another year of resilience. In the US, the Trump administration is riding into the sunset without disruptive fireworks, sparing the global economy new trade tensions and new wars.

Instead, the investment boom in AI might slow down somewhat, but infrastructure investments and AI adoption will support growth in many economies as energy prices return to more normal levels. At the same time, the current inflation wave will lose momentum, allowing central banks to keep their powder dry.

The mix of modest growth, slowing inflation and policy rates being only mildly restrictive could surprise many. Admittedly, this is a scenario accompanied by a lot of uncertainty and noise, but underneath this well-known layer of risk and fear, an almost benign macro environment could emerge in 2027. What a nice change.

Our risky call: Transatlantic divide makes an unexpected turn

Over the last few years, Europe has often been left flabbergasted by political developments in the US and the increasingly hostile transatlantic relationship. The US midterm results may now raise hopes that those ties can gradually recover.

Yet just as the US appears to be stepping back from populist and hegemonic policies, Europe could be moving in the opposite direction. With elections next year in France, Italy, Poland, Spain, and maybe even Germany, Europe risks ushering in a new period of political disruption, with stronger eurosceptic forces weighing on sentiment and investment and complicating further European integration.

One upside of Donald Trump's second term in office was that his politics and policies created a common adversary and brought Europe closer together. The irony of 2027 could be that, just as Trump enters his lame-duck period, political divisions within Europe begin to do the damage to European unity that external pressure from Washington never could.

Our bold call: Global fiscal dominance

Our bold call for the global economy sees many governments struggling with the pressures of higher interest rates, rising debt levels and the need to increase investments, while ensuring social or societal peace.

We have seen the script before; it's one that leads to spiralling government debt and even higher interest rates. There are two main ways out of this situation. The first would be a globally coordinated debt restructuring, which is even too bold for this call. The second is imposing direct or indirect pressures on major central banks to restart asset purchase programmes and keep bond yields under control, with the option to still write off government bonds once they are on central banks' balance sheets.

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