Global growth stronger than expected, fueled by AI and trade shifts

Global growth in 2025 reached 3.3 percent, half a point higher than forecast, primarily driven by the artificial intelligence (AI) boom, particularly the construction of data centers.

The United States benefited significantly, recording 3.2 percent GDP growth since last spring, supported by buoyant household consumption and stock price gains.

International trade also saw a rapid and persistent pickup.

In China, exporting firms redirected excess output to other markets despite US trade barriers, helping achieve a 5 percent growth target, aided by 8.8 percent lower export prices and higher technological content.

However, this strategy fuels deflationary pressures without stronger domestic consumption.

Monetary conditions eased across leading advanced economies, with interest rates in the UK, US, and euro area down by 150, 175, and 200 basis points respectively from their peaks.

The IMF forecasts global growth to remain stable at 3.3 percent in 2026.

The European economy achieved higher-than-expected growth (1.5 percent) and controlled inflation (1.7 percent in January), despite external shocks.

Growth was driven by real income recovery and easing monetary conditions, but consumer spending remains subdued due to global uncertainty.

Investment in intangibles is increasing, though its economic impact trails the United States.

Industrial weakness is exacerbated by Chinese competition, even in high-tech sectors.

Eurosystem staff project inflation to stabilize around 2 percent medium-term.

The ECB has kept key interest rates unchanged since last June.

Risks include geopolitical tensions, commodity price increases (upside), and euro appreciation or financial market corrections (downside).