Global fiscal stimulus: "More thunder than rain"? UBS expects it to contribute only 8 basis points to GDP growth in 2026.

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Although major economies such as the United States, Japan, and Germany have launched fiscal stimulus measures, the actual global impact may be far less than market expectations. UBS's latest research shows that the global fiscal shock in 2026 is expected to contribute only about 8 basis points to global GDP growth, and in 2027 it may turn into a 14 basis point drag, with the overall fiscal stance close to neutral.

This judgment is based on an analysis of changes in cyclically adjusted primary fiscal balances. According to news from Wind Trading Desk, UBS economist Arend Kapteyn pointed out in a report released on February 16 that despite the market's high attention to the U.S. "Beautiful" Act, Japan's fiscal loosening, and the plans in Europe and Germany to increase defense and investment spending, from a global perspective, the scale of change in fiscal stance this year is at a historically low level.

Specifically, the net fiscal shock in the U.S., excluding the impact of tariffs, is about 30 basis points; Japan has so far loosened by only 0.9 percentage points of GDP; Germany's stimulus scale is about 1 percentage point of GDP. UBS's statistics show that in the past 20 years, in all 9 years when the U.S. implemented fiscal stimulus, the strength of the stimulus exceeded the forecast level for 2026.

This means investors should not overly rely on fiscal stimulus to drive global economic growth. Emerging markets are generally in fiscal consolidation, and the scale of stimulus in developed economies is also relatively moderate; global economic growth still needs to rely on other drivers.

Global Fiscal Stance Only Slightly Better Than Neutral

UBS's method for calculating global fiscal shock is to observe changes in the cyclically adjusted primary fiscal balance, that is, changes in the basic fiscal position excluding the effects of the economic cycle and interest payments. According to this method, the global fiscal shock in 2026 is expected to support 8 basis points of GDP growth, and in 2027 it will turn into a 14 basis point drag, both values close to zero.

UBS's historical data from the past 20 years shows that the global fiscal stance has fluctuated significantly in different periods, but the forecast values for 2026 and 2027 are in a relatively moderate range compared to history. This sharply contrasts with the current heated discussions in the market about large-scale fiscal stimulus in major economies.

The report points out that there are very few countries with changes in fiscal stance exceeding 0.5 percentage points this year. Emerging markets (except China) are mainly in fiscal consolidation, resulting in the global fiscal stance being only slightly better than neutral.

U.S. Stimulus Intensity is Below Historical Levels

The U.S. "Beautiful" Act is one of the market's focal points. UBS estimates that the act will contribute about 45 basis points of support to U.S. economic growth. However, after excluding the impact of tariffs (technically classified as revenue items, similar to taxes), and taking into account a drag of about 10 to 15 basis points from state and local governments and the effects of expiring stimulus measures, the net fiscal shock in the U.S. is about 30 basis points.

This figure then needs to be multiplied by the U.S.'s weight in global purchasing power parity (PPP) to derive its contribution to global GDP. UBS specifically points out that in the past 20 years, the U.S. implemented fiscal stimulus in 9 years, all of which had stronger stimulus than the forecast for 2026, showing that this round of stimulus is not particularly outstanding in historical terms.

Japan and Europe's Progress is Below Expectations

For Japan, UBS estimates that so far the fiscal stance has loosened by only 0.9 percentage points of GDP, although there may be more measures introduced in the future. This scale is relatively limited and is unlikely to have a significant impact on global economic growth.

Germany and the Eurozone are also below previous market expectations. UBS has lowered its expectation for the speed of new stimulus measures in Germany, currently estimating that Germany's fiscal stimulus this year will be about 1 percentage point of GDP, which is about two-thirds of the Eurozone's total stimulus. The Eurozone's overall defense expenditure growth is also slow, with only 0.3 percentage points of GDP this year.

UBS's analysis indicates that despite countries showing positive policy stances, the actual implementation strength and speed are relatively moderate, resulting in a scenario where the global fiscal stimulus is "more thunder than rain".

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