Scenario Eco - The global economy is resilient but will not escape a slowdown

Scenario Eco – Societe Generale
Michala Marcussen, Societe Generale group Chief Economist
December 2025
The global economy is resilient but will not escape a slowdown

What has driven economic resilience in 2025?
The global economic resilience observed in 2025 is rooted in several drivers. Top of the list is AI and digital infrastructure, with 2025 seeing a surge in capacity build out. Further drivers on the investment front include defence and security, be it military capacity, protection of critical infrastructure or resilience of corporate supply chains. Beyond investment, energy has also been supportive to growth in 2025 not least with further declines in oil prices. Regulatory easing and simplification have also been supportive as have pockets of fiscal stimulus.
These core economic themes have also driven substantial asset price gains, which in turn brought favourable financing conditions and underpinned household consumption, not least in the United States.

Will resilience also shape 2026?
Looking ahead to 2026, we note several headwinds. Tariffs have yet to feed fully through and we observe that labour markets are softening across several major economies. The US, moreover, faces weaker demographics with the sharp slowdown of immigration. More broadly we observe that what started as geopolitical uncertainty is increasing translating to geoeconomic fragmentation, marking a persistent headwind to global economy growth. Open questions also remain on the potential for continued strong asset prices gains. Combined we expect these headwinds to slow growth momentum in 2026.

Can central bank rate cuts tame downside risks?
Potential for monetary policy accommodation remains on both sides of the Atlantic, but stickiness on service prices, entails that rate cuts will be cautious. The arrival of a new Fed Chair in May, when Chair Powell’s mandate ends, will mark an important test for financial markets.
In discussing monetary policy, it is important also to consider its transmission. 2025 saw core euro area bond yields increase, and this despite ECB rate cuts. Part of this reflects global spillovers, not least from the repricing of Japanese bond yields. Increased uncertainty and concerns on sovereign debt dynamics are also key drivers of higher yields.

What will 2026 bring for France?
France continues to face a significant headwind from the fragmented political situation. This not only poses a challenge in terms of reducing the budget deficit, but also in advancing key structural reforms. This situation seems unlikely to change ahead of the Presidential election due in spring 2027.
On a more positive note however, it is important to keep in mind that France enjoys sound institutions and a well-diversified economy in the heart of Europe. This positive is especially welcome with the renewed push for European competitiveness, and this with a growing sense of urgency. The Commission’s new focus on human capital, with focus on skills, could prove particularly valuable for France, not only in boosting growth but also in improving social mobility.