The global economic environment has weakened from the start of the year, with escalating economic nationalism and volatile tariffs adding to heightened uncertainty. South Asia, however, which is driven by India, is considered to be an important growth driver, the latest World Economic Forum (WEF) report states.
The 'Chief Economists Outlook' survey says that a vast majority (79%) of economists perceive the prevailing geoeconomic trends not as short-term disruptions but as signs of a deep structural shift in the global economy.
Faced with intensifying trade tensions and growing nationalist attitudes, chief economists across the world unanimously expect a tough year for the global economy.
Optimism, however, is highly region-specific. South Asia, led primarily by India, leads with 33% of economists predicting strong or very strong economic growth this year.
Conversely, 77% of those surveyed anticipate weak or very weak growth for the United States over the period to 2025, as well as ongoing inflationary pressures and a declining dollar. Europe's prospects look cautiously upbeat for the first time in years, mainly because of expected fiscal stimulus, especially in Germany. Prospects for China are still subdued, with economists split on whether it can meet its 5% GDP growth target this year, says the report.
Saadia Zahidi, Managing Director at the World Economic Forum, underscored, "Policymakers and business leaders need to counter increased uncertainty and trade tensions with more coordination, strategic responsiveness and investment in the growth potential of break-through technologies such as artificial intelligence. These actions are crucial for weathering today's economic headwinds and obtaining long-term resilience and growth."
The degree of international uncertainty is very high, with 82% of economists expressing concern. Although a narrow majority (56%) project some improvement in the next year, anxiety exists. The vast majority of respondents (97%) cite trade policy as the single most significant source of uncertainty, followed by monetary and fiscal policies. The uncertainty is likely to have adverse effects on key economic indicators like trade volumes, GDP growth, and foreign direct investment.
Most economists predict companies responding to this uncertainty by delaying significant strategic decisions, thereby increasing the risk of a recession. Second, debt sustainability has become an increasingly worrying issue, named by 74% of economists in both advanced and emerging economies. The vast majority also anticipate governments financing growing defense spending by borrowing more, which could cap spending on public services and infrastructure.
Artificial intelligence (AI) is a identified as a primary catalyst for the next economic shift, one with the potential to deliver massive growth but also significant risks. Almost half (46%) of chief economists envision that AI might lift world real GDP by a modest 0-5 percentage points in the next ten years. The primary drivers of growth are automation of activities, acceleration of innovation cycles, and augmentation of human productivity.
In spite of this promise, there are fears of job displacement, and 47% of economists predict net job loss through AI within the next decade, compared with 19% who see jobs increasing.
Among the most serious threats named is the abuse of AI to spread misinformation and destabilize society. Other high-priority concerns are rising market concentration and disruption of current business models.
In order to maximize the benefits of AI, the report emphasizes the imperative for swift action by governments and companies alike. Governments need to make AI infrastructure investment a priority, promote adoption in critical sectors, facilitate AI talent mobility, and invest in the upskilling and redeployment of the workforce.
Companies, on the other hand, need to transform their core operations to leverage AI technologies, upskill staff, and prepare leadership to navigate AI-powered change.
Read also| EY Report: India’s Growth Set to Stabilize in FY26 and FY27 Amid China’s Slowdown
