The global outlook has worsened since the start of the year due to rising economic nationalism and tariff volatility, which have fueled uncertainty and risk, stalling long-term decision-making, according to a World Economic Forum (wef) report released yesterday.
The latest Chief Economists Outlook revealed a strong majority (79 percent) of polled economists view the current geoeconomic developments as signs of a significant structural shift for the global economy rather than 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,” said WEF managing director Saadia Zahidi said.
“These steps are essential for navigating today’s economic headwinds and securing long-term resilience and growth.”
Uncertainty builds up
Global uncertainty is seen as exceptionally high by 82 percent of the chief economists. While a narrow majority (56 percent) expect conditions to improve over the next year, concerns persist. Nearly all chief economists (97 percent) rank 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 weigh on key economic indicators, including trade volumes (70 percent), GDP growth (68 percent) and foreign direct investment (62 percent).
Most chief economists (87 percent) anticipate that businesses will respond to uncertainty by delaying strategic decisions, increasing recession risks.
Debt sustainability is also a rising concern, cited by 74 percent of respondents for both advanced and developing economies. An overwhelming majority (86 percent) expect governments to meet rising defense spending needs through increased borrowing, potentially crowding out investment in public services and infrastructure.
Expectations diverge sharply
In early April, at the peak of uncertainty, most chief economists (77 percent) were anticipating weak or very weak growth through 2025 in the US, alongside high inflation (79 percent) and a weakening dollar (76 percent).
By contrast, they were cautiously optimistic about Europe’s prospects for the first time in years, mainly because of expectations of fiscal expansion, notably in Germany. The outlook for China remains muted, and the chief economists were divided over whether it will reach its target of 5 percent GDP growth this year. Optimism remains highest for South Asia, where 33 percent expect strong or very strong growth this year.