Global GDP Themes and Forecasts

The outbreak of war in the Middle East has introduced an energy-driven inflation shock, complicating the global growth outlook. In our view, the shock may delay disinflation, sustain higher interest rates and amplify fiscal pressures across both developed and emerging markets.

We believe economies with favorable energy positioning or geographic insulation are generally in a stronger position to navigate this environment, while net importers of oil and fiscally constrained sovereigns face greater strain. Divergence across regions is likely to widen, reversing what had been a trend toward more synchronized global growth heading into 2026.

USA

THE OUTBREAK OF WAR IN THE MIDDLE EAST COULD SUPPRESS US ECONOMIC ACTIVITY NEAR TERM, BUT WE BELIEVE THE COUNTRY IS MOSTLY INSULATED

• We believe a prolonged conflict would stoke inflation concerns, as oil prices would likely remain elevated for the duration.
• The US is a major oil producer, which leaves domestic supply much less constrained than foreign countries reliant on oil imports.
• In our view, headline inflation is likely to run hotter than we expected prior to the war, but pass-through to core inflation may not be significant.
• Market expectations for Federal Reserve interest rate cuts have become less aggressive. We think the Federal Reserve is likely to delay easing until Q3 or Q4 2026 as it assesses PCEⁱ inflation dynamics.
• We expect US corporate profits to remain near record-high levels throughout 2026. A broadening of earnings growth beyond the technology sector appears to be well underway. 
• We believe real GDP growth will be around 2.0% in 2026, which is slightly above long-run trend levels. Hiring may be slow, but we anticipate a flat unemployment rate.

LATIN AMERICA

LATIN AMERICA STANDS OUT AS A RELATIVE BENEFICIARY IN THE CURRENT ENVIRONMENT

• We expect key economies such as Brazil and Colombia to benefit from stronger external balances linked to energy exports.
• Distance from the conflict appears to offer a degree of relative “safe-haven” appeal to investors, which should support sovereign valuations.
• Chile represents an exception in our view, with greater vulnerability due to energy import dependence and subsidy-related fiscal pressures, despite the recent positive political shift back to the right.
• We believe the region may also benefit from the so-called “Donroe Doctrine,” a renewed US strategic focus on the Western Hemisphere, which could provide an implicit stability backstop.

ASIA

ASIA PRESENTS A MIXED OUTLOOK, DICTATED BY ENERGY DEPENDENCY AND FISCAL CAPACITY

• In Japan, rising energy prices heighten the risk of stagflation, and the Bank of Japan is considering delaying rate hikes. An extension of energy subsidies may worsen Japan’s fiscal challenges.
• China’s low reliance on oil and liquified natural gas helps to limit the country’s vulnerability to energy price spikes. Higher prices would help China exit deflation and potentially boost capital inflows and green technology exports.
• In our view, net energy importers such as India, Korea, Thailand and the Philippines face higher inflationary pressures and downside risks to growth due to disrupted supply chains.
• We believe net commodity exporters like Australia and Malaysia are in a relatively better position to weather the crisis. However, they are not immune to potential supply shortages of commodities they need to import, from petrochemicals to fertilizers.

EUROPE/CEEMEA

EUROPE/CEEMEAⁱⁱ REGION FACES ACUTE EXPOSURE TO THE ENERGY SHOCK, BOTH DIRECTLY AND INDIRECTLY

• We expect proximity to the conflict and reliance on imported energy to tighten financial conditions and weigh on growth in the region.
• In our view, a weaker European economy relative to the outbreak of the Russia-Ukraine war in 2022 suggests faster demand rollover, potentially limiting the need for aggressive rate hikes.
• Longer term, a protracted conflict may force Europe to reposition its energy relationship with Russia as an alternative to Middle Eastern instability.
• Contrary to typical oil-shock dynamics, we believe Gulf Cooperation Councilⁱⁱⁱ countries are vulnerable in this conflict because of direct threats to energy infrastructure, the closure of the Strait of Hormuz and significant hits to real estate and tourism.
• Countries such as Turkey and South Africa are likely to experience credit deterioration in our view, driven by reserve depletion and fiscal strain.

Endnotes

ⁱ PCE=Personal Consumption Expenditures.

ⁱⁱ CEEMEA=Central and Eastern Europe, Middle East and Africa

ⁱⁱⁱ Gulf Cooperation Council countries include Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.

Disclosure

Views as of April 9, 2026. This marketing communication is provided for informational use only and should not be considered investment advice. The forecasted views and opinions expressed reflect those of the Loomis Sayles Macro Strategies Group and do not necessarily reflect the views of Loomis, Sayles & Company, L.P. All statements are made as of the date indicated and are subject to change at any time without notice. Descriptions assume normal market conditions. Numbers are approximate.

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Performance data shown represents past performance and is no guarantee of, and not necessarily indicative of, future results.

Market conditions are extremely fluid and change frequently.

This blog post is provided for informational purposes only and should not be construed as investment advice. Any opinions or forecasts contained herein reflect the subjective judgments and assumptions of the authors only and do not necessarily reflect the views of Loomis, Sayles & Company, L.P. Information, including that obtained from outside sources, is believed to be correct, but Loomis Sayles cannot guarantee its accuracy. This material cannot be copied, reproduced or redistributed without authorization. This information is subject to change at any time without notice.

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