Goldman Sachs expects the world economy to grow slightly faster in 2027, with falling energy prices and a surge in artificial intelligence investment offsetting tighter financial conditions and fading government spending.
In its annual outlook, published on Thursday, the bank’s research arm forecasts global growth of 2.8 per cent next year, up from an estimated 2.7 per cent in 2026 and slightly above the economy’s potential rate. Chief economist Jan Hatzius, who led the report, described the baseline as “solid but unremarkable”, while warning that the path would be bumpier than this year’s and that risks were tilted to the downside.
The United States is expected to grow 2.4 per cent, China 4.5 per cent and the euro area just 0.9 per cent. India is projected to expand 7.2 per cent. Goldman expects lower energy prices to outweigh the drag from tighter financial conditions and a smaller fiscal impulse, with Brent crude falling to $78 a barrel by the end of 2027.
Artificial intelligence is the centrepiece of the forecast. Goldman expects global nominal AI investment to rise to $1.8 trillion in 2027 from $1.1 trillion this year, mostly driven by more than $500 billion of extra hardware spending in the United States. The bank estimates the investment boom will add 0.4 percentage points to global growth, and 0.6 points to US growth once undercounted semiconductor investment is included.
The bank is in two minds about what AI means for jobs. It expects the investment boom to raise corporate profits and GDP with only limited productivity gains in the first phase, with more substantial productivity gains and labour market disruption in a second phase. Its baseline is that AI adoption will have only a small effect on the labour market in 2027, with more notable effects in 2028 and 2029.
On interest rates, Goldman expects the Federal Reserve to raise rates twice more, in December and in March, before starting to cut in December 2027, with three further reductions in 2028 taking the federal funds rate to 3.25 to 3.5 per cent. It expects US core inflation to slow to 2.4 per cent by the end of 2027, from 3.2 per cent at the end of this year, as the effect of tariffs drops out of the figures and the inflation boost from the war in Iran fades.
The Bank of England is expected to raise rates once more, to 4.25 per cent in February, and then hold for the rest of the year. The Bank of Japan is the outlier: Goldman expects it to raise rates in December, March and June, taking its policy rate to 2 per cent.
China’s outlook is more mixed. Goldman forecasts growth of 4.5 per cent, slightly above the consensus of 4.4 per cent, on the strength of exports and a growing trade surplus. But domestic demand is expected to stay weak, held back by the property sector and cautious consumers, creating a small drag on the rest of the world’s growth — larger in manufacturing-heavy economies such as Germany.
The bank named three risks that could derail the outlook: a renewed escalation of the war in Iran, which could push oil prices sharply higher; turbulence in government bond markets as large fiscal deficits push up borrowing costs; and an earlier-than-expected peak in the AI investment cycle.
These are forecasts, not facts, and Goldman’s own report stresses that the balance of risks is tilted to the downside. The bank’s outlook is one institution’s view, and its predictions — including two more Fed hikes — run against market pricing in places. But as the first major Wall Street outlook of the season, it sets the terms for the debate about 2027.
Sources: Goldman Sachs, “The Global Economy Is Forecast to Grow 2.8% in 2027 as Oil Prices Decline” (https://www.goldmansachs.com/insights/articles/the-global-economy-is-forecast-to-grow-2-point-8-percent-in-2027-as-oil-prices-decline) ; Seeking Alpha via TradingView, “Goldman sees two more Fed hikes, then cuts, as 2027 growth edges up” (https://www.tradingview.com/news/seekingalpha:0d358e89a094b:0-goldman-sees-two-more-fed-hikes-then-cuts-as-2027-growth-edges-up/) ; ANI via Khel Ja, “Goldman Sachs Forecasts 2.8 Percent Global GDP Growth During 2027” (https://khelja.in/goldman-sachs-forecasts-2-8-percent-global-gdp-growth-during-2027/)
