The global economic outlook has deteriorated since the beginning of the year, as rising economic nationalism and tariff volatility contribute to uncertainty and threaten to stall long-term decision-making, according to a recent report from the World Economic Forum (WEF).
The latest Chief Economists Outlook reveals that a substantial majority (79 percent) of surveyed economists interpret the current geoeconomic developments as indications of a significant structural shift in the global economy rather than as a temporary disruption.
“Policymakers and business leaders must respond to heightened uncertainty and trade tensions with greater coordination, strategic agility, and investment in the growth potential of transformative technologies like artificial intelligence,” stated Saadia Zahidi, managing director of the World Economic Forum. “These steps are essential for navigating today’s economic headwinds and securing long-term resilience and growth.”
High levels of global uncertainty
Global uncertainty is considered exceptionally high by 82 percent of chief economists. While a slim majority (56 percent) anticipate conditions to improve over the next year, concerns remain prevalent. Nearly all chief economists (97 percent) identify trade policy as one of the areas of highest uncertainty, followed by monetary policy (49 percent) and fiscal policy (35 percent). This uncertainty is expected to adversely affect key economic indicators, including trade volumes (70 percent), GDP growth (68 percent), and foreign direct investment (62 percent).
Most chief economists (87 percent) predict that businesses will react to uncertainty by postponing strategic decisions, which increases recession risks. Debt sustainability is also a growing concern, cited by 74 percent of respondents for both advanced and developing economies. An overwhelming majority (86 percent) expect governments to address rising defense spending needs through increased borrowing, potentially crowding out investments in public services and infrastructure.
In early April, during the height of uncertainty, most chief economists (77 percent) anticipated weak or very weak growth through 2025 in the U.S., along with high inflation (79 percent) and a weakening dollar (76 percent). In contrast, they expressed cautious optimism regarding Europe’s prospects for the first time in years, primarily due to expectations of fiscal expansion, particularly in Germany. The outlook for China remains subdued, with chief economists divided on whether it will achieve its target of 5 percent GDP growth this year. Optimism is strongest for South Asia, where 33 percent expect robust or very robust growth this year.
Read more: Global economy to strengthen this year, but growth uneven: World Economic Forum report
AI’s economic impact
Artificial intelligence is set to drive the next wave of economic transformation, unlocking considerable growth potential but also introducing significant risks. Nearly half (46 percent) of chief economists anticipate AI will provide a modest global real GDP boost of 0-5 percentage points over the next decade, while an additional 35 percent project gains of 5-10 percentage points. Key growth drivers include task automation (68 percent), accelerated innovation (62 percent), and worker augmentation (49 percent). Despite the potential, concerns remain: 47 percent expect net job losses over the next decade, compared to just 19 percent who foresee gains.
Above all, respondents emphasized the misuse of AI for disinformation and societal destabilization as the primary risk to the economy (53 percent). Other significant risks include the rising concentration of market power (47 percent) and the disruption of existing business models (44 percent).
To fully capitalize on AI’s potential, chief economists underscored the necessity for bold action from both governments and businesses. For governments, top priorities include investing in AI infrastructure (89 percent), promoting adoption across key industries (86 percent), facilitating AI talent mobility (80 percent), and investing in upskilling and redeployment (75 percent). For businesses, the focus is on adapting core processes to integrate AI (95 percent), reskilling employees (91 percent), and training leadership to guide AI-driven transformation (83 percent).
