2026 Overview of the Global Economy

Published on July 16, 2026
Published by Economic Analysis Coordination Division


 

□ Part I. Global Economic Trends
   The global economy has continued to expand at a steady pace despite the energy shock stemming from the conflict in the Middle East and heightened geopolitical uncertainty, supported by increased investment in AI and improved financial conditions. Global trade has grown rapidly, driven by AI-related demand and robust trade growth in Asia. Global inflation has remained broadly stable, although higher energy prices resulting from the conflict in the Middle East have intensified inflationary pressures. In global financial markets, geopolitical risks have strengthened demand for safe-haven assets and heightened market volatility, while long-term interest rates have risen and the U.S. dollar has appreciated. Equity markets have continued to advance, supported by strong performance in technology stocks, particularly those related to AI and semiconductors.

□ Part II. Economic Trends in Advanced Economies
   Advanced economies have shown divergent growth patterns across countries and regions. The U.S. economy has maintained solid growth, Europe’s recovery has weakened amid external uncertainty, and Japan has continued to expand at a moderate pace. Despite a more restrictive tariff stance and the conflict in the Middle East, the U.S. economy has sustained robust growth, supported by increased private investment in equipment, software, and R&D, together with higher government spending. However, tariff-related cost increases, weakening consumer sentiment, and inflationary pressures stemming from the Middle East pose downside risks to the U.S. economic outlook. Europe has experienced a moderate recovery, led by private consumption and investment in defense and infrastructure, although the recovery has lost some momentum amid external uncertainties, including global trade tensions and pressures for fiscal consolidation. Japan has continued to grow moderately on the back of improved corporate earnings, despite sluggish private consumption and business investment.

□ Part III. Economic Trends in Emerging Economies
   Emerging economies have generally maintained solid growth. However, growth has slowed in Brazil, as tight monetary policy has weakened domestic demand, and in Russia, mainly due to geopolitical constraints, including the prolonged war and international sanctions. Despite tensions with the U.S. and continued weakness in the property market, China has sustained robust growth, supported by rising exports and increased investment in advanced manufacturing. Its growth drivers have also continued to shift away from real estate and construction toward advanced manufacturing and exports of high-tech products. India has maintained rapid growth, underpinned by robust domestic demand, increased output in manufacturing and services, large-scale infrastructure investment, and policies aimed at promoting the manufacturing sector. Vietnam has also continued to grow rapidly, supported by expanding domestic demand and exports, increased public investment, and efforts to foster advanced manufacturing.

□ Korea’s Trade and Investment Relations with Major Economies
   Korea’s trade and investment relations with major economies have continued to evolve amid changes in the international trade environment and the reconfiguration of global supply chains. In trade, the U.S. and Vietnam have emerged as major sources of Korea’s trade surplus, while the strategic importance of the EU and India has increased. By contrast, Korea’s intermediated-goods-based division of labor with China has weakened, and trade with Russia has contracted under the impact of international sanctions against the country. Korea’s outward foreign direct investment has expanded, particularly toward in the U.S., the EU, India, and Vietnam, while investment in China and Russia has declined. Inward foreign direct investment into Korea from major economies has increased in advanced manufacturing and services, particularly from the U.S., China, and Vietnam, whereas investment from the EU has decreased.