The world economy is stumbling forward rather than sprinting, warns Handelsbanken in its Global Macro Forecast published today. The bank describes the outlook as “muddling through”: growth is slowing, risks are high, but outright recession is still avoided.
At the heart of the weakness is Washington’s tariff shock. US import duties have surged to an average of more than 17 percent, clouding sentiment and hitting trade flows. “The uncertainty around tariffs has faded, but the drag from higher costs is now biting harder,” Handelsbanken notes.
The forecasts show a shifting balance of power:
- Global GDP growth is set at 2.9% in 2025–26, before accelerating to 3.1% in 2027.
- Europe is expected to pick up speed, fuelled by German fiscal stimulus, easing inflation and lower rates.
- The US, by contrast, is on track for a protracted slowdown as tariffs fuel inflation, dent household spending and keep borrowing costs elevated.
Inflation trends diverge sharply. The US will remain stuck above the Federal Reserve’s 2% target through 2027, Handelsbanken says, while eurozone inflation is drifting below the ECB’s target before stabilising. The Fed, Bank of England and Norges Bank are tipped to cut rates only cautiously, while the ECB and Sweden’s Riksbank are already near the end of their easing cycles.
The report also raises a red flag over global debt. Public finances in the US, France and the UK are deteriorating, pushing long-term yields higher. Handelsbanken warns of a “fairly high risk” that a fiscal crisis could erupt in a G7 country within the next decade if policymakers fail to act.
In the Nordics, the bank sees Sweden’s economy still fragile, requiring fiscal stimulus and another Riksbank cut to 1.75%. Norway, meanwhile, is wrestling with stubborn inflation despite stronger GDP growth, leaving its central bank in a bind.
For investors, the message is clear: expect slow growth, higher-for-longer borrowing costs and persistent fiscal risks — but also opportunities as Europe pulls ahead of a faltering US.
Source: Handelsbanken Research, Global Macro Forecast – Muddling Through, 10 Sept 2025
