Page 10 - FIPI - Policy & Economic Report May 2026

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

Economy in Focus

1. A snapshot of the global economy

Global Economy Under Pressure from Inflation and Supply Constraints

The global economic outlook weakened further in May 2026 amid persistent inflationary pressures,
elevated energy prices, tightening financial conditions, and growing supply chain disruptions. According
to S&P Global Market Intelligence, higher-for-longer energy prices are expected to keep inflation elevated
while weighing on global growth prospects. Brent crude oil prices are projected to remain above US$100
per barrel through the remainder of 2026, reflecting continued supply disruptions and elevated
geopolitical risks.

Global growth forecasts have consequently been revised downward across most major economies. S&P
Global lowered its global real GDP growth forecast for 2026 to 2.2 %, compared with 2.9 % projected
earlier in February 2026. Europe is expected to be among the hardest-hit regions, with several major
economies including Germany, France, Italy, and the UK projected to witness temporary economic
contractions amid weakening demand and higher energy costs.

The report noted that global growth is becoming increasingly uneven and narrowly concentrated, with AI-
related investments continuing to support economic activity in select sectors, particularly in the United
States. However, weakening consumer spending, affordability pressures, and slower services sector
activity remain key downside risks to the global outlook.

Among major economies, the Eurozone experienced the sharpest slowdown in April 2026, with output
declining for the first time in 16 months due to weak services activity and supply-side disruptions. In
contrast, emerging economies such as India and China continued to show relatively stronger momentum.
India remained the strongest-performing major economy in the PMI survey, with improvements in both
manufacturing and services activity. China also recorded its second-highest expansion in nearly two years,
supported by stronger industrial production and services growth.

Global financial markets have remained relatively resilient despite rising macroeconomic risks. However,
S&P Global warned that sovereign bond yields have come under renewed upward pressure as markets
adjust to expectations of prolonged inflation and tighter monetary policy conditions.

Global Inflation Trends – May 2026

Global inflationary pressures intensified further in May 2026, driven primarily by elevated energy prices,
rising shipping costs, and worsening supply chain disruptions. S&P Global revised its inflation forecasts
upward across most major economies for both 2026 and 2027, citing sustained commodity price pressures
and broadening producer price inflation.

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