Allianz Trade Warns of Global Trade Slowdown and Rising Stagflation Risks

The latest report from Allianz Trade, a leading international credit insurance firm, offers a sobering outlook on the global economy. Based on economists’ projections, the study warns that world trade is entering a slowdown phase, while advanced economies are at risk of a mild stagflation period — a combination of stagnant growth and persistent inflation. According to the report, the volume of global trade in goods and services, which grew by 2% in 2025, is expected to plunge to 0.6% in 2026, marking a significant contraction. Allianz Trade notes that the ongoing trade wars are already hurting exporters worldwide, and the ripple effects will soon reach US consumers through inflationary pressures.

Central Banks Struggle With Limited Policy Space

The report highlights the challenging position of central banks in developed markets as they attempt to balance inflation control with slowing growth. Allianz Trade expects the US Federal Reserve (Fed) to execute only three modest rate cuts by mid-2026, keeping its policy rate in the 3.25–3.50% range thereafter. The cautious approach underscores concerns about inflation persistence, especially as global supply chains remain fragmented and wage pressures continue in major economies. Other central banks in Europe and Asia are projected to follow a similar pattern, signaling a prolonged period of tight monetary conditions despite the slowdown in trade.

Corporate Insolvencies on the Rise

Allianz Trade also warns that global corporate insolvencies could peak in 2027, reflecting the delayed impact of higher interest rates, weak demand, and increased borrowing costs. The firm suggests that businesses heavily reliant on debt or export markets are particularly vulnerable to liquidity crises. This trend could reshape international trade networks, as struggling companies face consolidation or exit markets altogether.

Türkiye: Fragile Stability Amid Policy Normalization

Turning to Türkiye, the report describes a fragile yet improving macroeconomic balance driven by policy normalization. Allianz Trade acknowledges that the Central Bank of the Republic of Türkiye (CBRT) has maintained a tight monetary stance, effectively curbing domestic demand while helping restore macro stability. The report notes a gradual decline in inflation from previously elevated levels, reflecting the early success of anti-inflation measures. Meanwhile, tourism revenues and reduced import volumes have contributed to narrowing the current account deficit, improving Türkiye’s external balance position.

Policy Credibility Key to Sustainable Growth

Allianz Trade emphasizes that Türkiye’s path to sustainable growth depends heavily on maintaining policy credibility and fiscal discipline. The report highlights that any deviation from fiscal prudence or monetary consistency could reignite inflationary pressures and weaken investor confidence. “Policy reliability remains the cornerstone of Türkiye’s growth outlook,” the study notes, warning that short-term stability could falter without continued reform efforts.

Downside Scenarios: Protectionism and Currency Shifts

The report also explores several adverse global scenarios. Allianz Trade estimates a 45% probability that rising protectionism could lead to deeper stagnation in global trade over the next two years. Simultaneously, it assigns a 35% probability to a dollar shock that could push the euro/dollar exchange rate above 1.25, should geopolitical or financial disruptions undermine the dollar’s dominance. Such developments would reshape currency flows, global inflation dynamics, and trade competitiveness, particularly in emerging markets.

A World Entering a Slower, Riskier Phase

Overall, Allianz Trade’s outlook portrays a world economy at a crossroads — one struggling with slowing trade, sticky inflation, and waning consumer confidence. While the report stops short of forecasting a global recession, it underscores that the era of rapid globalization and cheap money is over. For Türkiye, cautious optimism prevails: macroeconomic rebalancing is underway, but external fragility and global volatility mean that the margin for policy error remains narrow.