Inflation and interest rates are settling globally, and stocks — especially if they're artificial intelligence related — are doing well, two points that provide hope for 2026.

Ian Stewart, partner and United Kingdom chief economist at Deloitte, said during a Jan. 13 webinar that 2026 likely will be a so-so year, one mirroring 2025.

Lackluster growth in the economies of the West will be the headline news, he said, while underlying them is the challenging geopolitical climate.

High government debt seems likely for the rest of this decade, he said, with most countries running sizeable budgetary deficits and the U.S. showing its highest level since World War II.

“It is forecast to continue growing,” Stewart said. “Concerns over levels of indebtedness will be a continued theme through 2026.”

He said the world powers are in a heightened state of “competition and stress.”

Stewart said chief among the headlines of 2025 is U.S. debt reaching $37 trillion.

“Inflation is a real worry in the U.S.," he said. "Can growth catch up? If not, it is about cutting expenditure, and that is difficult to do without cutting welfare and social payments.”

Here are some other highlights of the year:

• The U.K. government needs to fill a £22 billion ($30 billion) hole in public finances, according to the Institute of Fiscal Studies.
• U.K. inflation rose more than expected in July, up 3.8%, and economists say that figure places doubt on further prospects of Bank of England interest-rate cuts in 2026.
• Oil prices fell, and gold and silver prices soared, reflecting uncertainties of inflation and public borrowing.
• Tariffs were far higher than expected, even with pullbacks from the U.S. administration, and a big question in 2026 is how these tariffs will feed through the global economy.
• The FTSE100 increased in year-on-year terms by 26%, and the S&P 500 was up 18%.
• U.K. and EU equities both outperformed U.S. ones, with those in the U.S. falling by 9% due to concerns about international policy.

Stewart said all the signs point toward the U.S. having a good year of growth.

“There has been a lot of stimuli via fiscal policy and a marked uptick in productivity, but one big question is what follows the appointment of a new chair of the Federal Reserve in May,” he said.

Stewart believes even if the new chair acts in what he called a “MAGA-dovish” manner, rate cuts would likely remain modest.

“Many have remarked that any recovery will be K-shaped,” he said. “Consumer confidence is low, despite rising incomes. … Reduced immigration will place pressure on labor.”

He said two notable political dates on the U.S. calendar are the mid-term elections in November and the Supreme Court’s decision on the legality of tariffs.

“[President Donald] Trump will try and keep energy prices low … and even if the Supreme Court rules against tariff policy and repayment is required, the administration would find alternative routes to keep them,” he said.

Stewart said the U.S. has an enviable growth rate, despite it slowing.

The EU wants to emulate that success, he added.

“The U.S. tends to be more of a less-regulated economy, and the EU has looked in two big reports at mirroring that, to take on more risk. … The U.S. has cut taxes, a lot of that having been funded by debt, which one might say is not a good idea,” he said.

Stewart said the risk of inflation increases in the U.S. is on the upside.

There are notable political calendar dates in Europe, too.

Germany is the “missing engine of European growth," according to Stewart. Regional and state elections take place in both March and September there.

“Germany, we believe, will be reignited this year. Defense spending has risen notably but so has that on infrastructure,” he said.

Deloitte predicts gross domestic product growth in Germany will finish 2026 up 0.9%.

He said U.K. GDP will increase 1.3%, while that of India will be up 6.2% and China's will be up 4.2%.

Deloitte’s Stewart said while the U.K. has managed to maintain growth, the current rate is at 40% of pre-Great Financial Crisis level.

“Economic progress remains positive but has slowed," he said. "This is not a U.K. problem alone. Other European countries have this [scenario, too], as does the U.S."

He noted there are global concerns about the cost of living and prospects for younger generations.

Some of the tailwinds in the U.K. include increased government spending; lower inflation; lower interest and mortgage rates; reduced savings rate; undervalued equities; and effects from the U.S. economy. Headwinds include low productivity; even more tax burdens; strained public finances; political uncertainty; unemployment; and cautious consumers.

“No one expects to get to the growth rates we saw at the turn of the millennium, with that period’s hyper-globalization,” Stewart said.

Some point to artificial intelligence as the answer to boosting economic growth, but Stewart warned 2026 will be a year of embedding AI into economies. That means potential benefits will not reveal themselves until some point down the road.

He quoted an October 2018 — last revised in September 2025 — paper from the National Bureau of Economic Research, “The productivity J-curve: How intangibles complement general purpose technologies” by Erik Brynjolfsson, Daniel Rock and Chad Syverson.

“Historical patterns tell us that there’s generally been a significant time lag between the marketplace acceptance of a potentially transformative technology and its broader impact on industries, economies and societies,” that research reads.

In other words, it takes time, but the first indications might be changes to employment patterns, which Stewart said could come to light before the end of 2026.

There are risks around AI, he said, such as: AI firm valuations; that equities are dominated by U.S. tech; the sector’s high-equity ownership; a shift in ownership of this industry from cash to debt; the lack of barriers to newcomers, some of which are deemed to be unfriendly as evidenced by noise around China’s AI firm DeepSeek; and the lack of evidence still that AI does drive productivity.

Reassurance comes in that cash remains the major AI driver, the sector’s principal businesses are profitable and there is less scope for contagion due to the existence of better regulated markets since the Great Financial Crisis.

One last issue that will continue in 2026, Stewart said, is immigration, which will influence labor.

Left-leaning governments are being tougher on immigration, he said, notably Denmark but also Germany, U.K. and Australia.

“It is now not a left-right argument,” he said.

Coupled with that are aging Western populations buoyed by generous retirement programs, both of which are a lag on growth but potentially too hot a political potato to touch.

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