The global economy is expected to stabilize over the next year, but constrained government finances, rising household costs, geopolitical tensions and uncertainty around artificial intelligence investment could weaken the recovery, according to the World Economic Forum’s latest Chief Economists’ Outlook.
The report, released on September 22 during the World Economic Forum’s Sustainable Development Impact Meetings in New York, found that 56% of surveyed chief economists expect the global economic outlook to remain stable or improve over the next 12 months. That marks a sharp reversal from May, when 89% of respondents expected global conditions to weaken.
However, the improved outlook remains fragile. Nearly all respondents—97%—identified geopolitical conflict as a likely source of uncertainty over the coming year, while 58% expect the risk of asset-price corrections. Only about one-quarter of the economists surveyed expect the global economy to become more resilient.
“Chief Economists expect the global economy to stabilize, but uncertainty remains high with geopolitical volatility, potential asset-price corrections, greater scrutiny of AI investment and persistent cost-of-living pressures,” said Attilio Di Battista, Head of Economic Growth and Transformation at the World Economic Forum.
“Government support played a critical role in navigating successive crises, but fiscal capacity is likely to be more constrained going forward,” he said. “The priority now is to strengthen the foundations of resilience before the next shock arrives.”
The report found that public spending and fiscal interventions have been a major source of global economic resilience since 2020, helping countries absorb the effects of the COVID-19 pandemic, supply-chain disruptions, inflation, higher interest rates and geopolitical shocks.
Sixty-nine percent of respondents said fiscal support had been the main factor supporting global resilience since 2020. But only 28% believe government spending and fiscal measures will play a similarly important role over the coming year.
The finding highlights a challenge for governments facing high public debt, elevated borrowing costs and growing pressure to maintain social spending while investing in infrastructure, energy systems and digital transformation.
Instead, economists expect future resilience to depend more heavily on flexible supply chains, technology-led productivity gains and the ability of energy markets to adapt to shifting demand and supply conditions. The United States and China were viewed as the economies best positioned to withstand future shocks.
For developing economies, particularly those with limited access to affordable financing, the expected reduction in fiscal space could make it harder to cushion households and businesses from food-price increases, energy costs, climate shocks and external financial pressures.
Artificial intelligence remains a major source of optimism among chief economists, although the survey also points to increasing concern about the social and infrastructure costs of the technology’s rapid expansion.
Ninety-seven percent of respondents expect AI adoption to increase in the next 12 months, while 69% believe the technology will generate meaningful productivity gains. About 78% expect investment in data centres and related AI infrastructure to account for a significant share of global growth.
Yet economists also warned that the expansion of data centres could face political and public opposition. Seventy-nine percent expect significant pushback from communities affected by major data-centre projects, particularly where they raise pressure on electricity networks, water supplies and land use.
The report found that 78% of respondents expect data-centre expansion to increase electricity prices, while 58% anticipate upward pressure on water costs. At the same time, 61% do not expect data-centre investment to produce a significant share of global job creation.
The findings point to a growing debate over whether the economic benefits of AI infrastructure will be distributed widely enough to offset the costs imposed on communities and public utilities.
The report also suggests that competition between the United States and China in AI development could become more balanced. Sixty-nine percent of respondents expect Chinese large language models to close the gap with their US counterparts over the next year.
Despite signs of improved growth prospects, chief economists expect the global economy to become more fragmented. Seventy-seven percent of those surveyed said they expect geoeconomic fragmentation to increase during the next 12 months.
More than half of respondents—55%—expect tariffs to rise in the United States, while 43% expect higher tariffs in Europe. Such measures could reshape trade flows as businesses seek new suppliers, production locations and markets.
Two-thirds of economists still expect global trade volumes to increase, indicating that trade is likely to adapt rather than contract. Eighty-three percent expect Chinese exports to countries outside the United States to rise, reflecting continued efforts by Chinese firms to diversify export destinations amid trade tensions.
The United States was again ranked as the most favourable business environment for multinational companies. South-East Asia and Europe both improved by one place in the rankings, while India fell to fourth position and China remained fifth.
The report said economic prospects had strengthened across most regions but remained uneven. India, South-East Asia, Central Asia and the United States received the strongest assessments from respondents.
China’s outlook weakened, with about one in three chief economists expecting weak growth. Europe remained the weakest major regional economy, although its outlook improved modestly; 61% of respondents still expect weak or very weak growth in the region.
About one-third of respondents expect unemployment to increase in the United States, China and Europe. Monetary policy is also expected to diverge, with tighter settings anticipated in Japan, the euro area and the United States, while China is expected to move toward easier policy conditions.
The outlook is likely to be felt most directly through household budgets. Economists expect the cost of living to rise further, led by food prices, electricity bills and transport costs.
Food prices are expected to rise, according to 88% of respondents, followed by electricity costs, cited by 83%, and transport costs, cited by 77%. The report warned that real incomes are likely to stagnate or decline in most regions.
South-East Asia and India were the main exceptions, with more than 60% of respondents expecting real incomes to increase in those regions.
Governments are expected to rely primarily on broad measures to respond to cost-of-living pressures. Sixty percent of respondents expect tax reductions on essential goods, 54% anticipate consumption subsidies and 50% expect price caps.
However, fewer economists expect more targeted measures aimed at vulnerable households. Only 36% anticipate tax reductions specifically for low-income groups, while just 26% expect targeted cash transfers.
The report suggests that governments may continue to favour highly visible, broad-based policies even though these can be costly and less effective at reaching households most affected by inflation and weak income growth.
