LONDON / BERLIN
The global economy has entered the new year under pressure from concerns over a potential “AI bubble,” record levels of public and private debt, and persistent geopolitical risks.
As many economies left 2025 behind amid loosening monetary policies, slowing inflation, rising protectionist trade measures, and geopolitical uncertainty, some of the major risks that dominated last year have eased. Others, however, are expected to continue into 2026.
According to an analysis compiled by Anadolu based on assessments from ING Think, Capital Economics, and Deloitte, markets expect inflation to continue declining in many countries in 2026, with easing pressures reflected in policy interest rates.
At the same time, stronger-than-expected demand in some economies could reignite inflationary pressures. As a result, inflation risks are not expected to dominate the global outlook this year to the same extent as in 2025.
One of the most pronounced risks in 2026 centers on concerns over an “AI bubble.” As the economic impact of artificial intelligence becomes clearer, investment has surged, but analysts warn that the “monetization” of AI remains uncertain.
A sudden drop in AI investment — which contributed roughly one percentage point to US growth in 2025 through construction and capital spending — could be enough to push the US labor market into a full-scale recession.
While many economists expect AI to boost productivity and help reduce inflation over time, large-scale investment in AI infrastructure in the short term could crowd out other economic activity.
Data centers are projected to account for about 10% of US electricity demand by 2030. Rising demand could strain power grids, increasing the risk of outages and higher electricity prices.
Growing investment needs also raise the risk of new supply shortages at a time when immigration rules are tightening in the US and Europe.
Debt at record levels
According to the International Finance Institute’s debt report, total global debt rose to about $346 trillion in the third quarter of 2025, increasing by more than $26.4 trillion in the first three quarters of the year.
Total debt reached roughly 310% of global Gross Domestic Product (GDP) during this period.
Driven largely by public borrowing, debt levels in both advanced and emerging economies hit new records.
High debt relative to national income in several developed economies points to the risk of a debt crisis, while high interest rates, rising borrowing costs, and negative capital flows are making debt repayment increasingly difficult for developing countries.
Although debt growth remains concentrated in the United States and China, most of the increase came from developed markets, where debt accumulation accelerated this year amid policy easing by major central banks.
US-China relations
Strained relations between the US and China, particularly their impact on rare earth element supplies, remain another major risk for the global economy.
Recent trade tensions resulted in a 12-month truce following face-to-face talks between US President Donald Trump and Chinese President Xi Jinping. Under the arrangement, tariffs and export controls are expected to remain unchanged for most of 2026. However, the “temporary tariff truce” remains fragile.
If tensions escalate, non-tariff barriers such as controls on rare earth exports could be imposed, directly affecting the semiconductor, automotive, and defense industries, tightening supply chains and driving prices higher.
Oil prices
Renewed geopolitical tensions and the risk of higher oil prices also pose a threat to global growth.
One of the most significant upside risks to oil prices remains Russian supply, amid US sanctions and Ukraine’s continued attacks on Russian energy infrastructure.
While markets broadly expect Russian oil to continue reaching global buyers despite sanctions, more effective enforcement could reduce the expected supply surplus in 2026 and challenge assumptions that Brent crude will remain near $60 per barrel.
Developments in Venezuela have also drawn renewed attention. Following US intervention, President Trump said Washington would be “very strongly” involved in the oil sector of the country with the world’s largest oil reserves.
Uncertainty over Venezuela’s oil output, combined with the fragility of the ceasefire in Gaza, has increased the likelihood that supply risks from the Middle East could re-emerge.
Sharp increases in oil prices could weaken global growth and force central banks to raise interest rates or limit rate cuts to contain inflation.
US labor market
A cooling US labor market combined with disappointing productivity growth could weaken employment gains and household spending.
This could trigger further job losses and a deeper contraction in consumption, representing one of the most significant downside risks for the world’s largest economy.
In Europe, vulnerabilities related to debt and budget deficits are expected to widen, particularly in France, amid higher defense spending.
If bond yields rise further, the economic impact will depend largely on central bank responses. Without renewed monetary easing, governments may be forced into austerity measures that could slow growth.
China’s real estate market
Concerns over China’s economic outlook persist, led by continued weakness in the housing sector.
Falling home prices have deepened problems in the real estate market, which plays a central role in China’s economy and affects industries such as cement and steel.
Housing carries far greater economic and social significance in China than in many other countries, shaping growth, household wealth, and political stability.
After stabilizing in early 2025, property prices began falling more rapidly from mid-year. Inventories remain high, and real estate investment continues to weigh on growth.
Concerns over defaults resurfaced after state-backed developer China Vanke requested a one-year extension on bond repayments.
Following extensive market-support measures in 2024, Beijing slowed intervention in 2025, as voices advocating allowing the cycle to run its course gained influence.
A prolonged downturn could reduce household wealth, weaken bank balance sheets, and dampen sentiment, undermining efforts to shift toward domestic-demand-led growth.
If peace talks in the Russian-Ukraine War, ongoing since February 2022, succeed, the economic impact will depend on how unresolved issues such as territorial recognition are addressed and how durable any ceasefire proves to be.
In a more optimistic scenario, a credible long-term agreement could encourage investment in Ukraine’s reconstruction and improve sentiment across Eastern Europe.
The extent to which sanctions on Russia are lifted will also matter. While Russian oil supply has not declined sharply in recent years, easing sanctions could reduce supply risks hanging over the market.
The impact on natural gas markets could be more pronounced, particularly if Europe resumes purchases of Russian gas.
Lower energy prices would support global growth, and some central banks, including the Bank of England, could adopt a more “dovish” stance despite recent “hawkish” responses to supply-driven inflation.
