Chief economists’ outlook on the economy is subdued amid ongoing trade and geopolitical tensions, with risks tilted to the downside, according to the World Economic Forum’s (WEF) latest Chief Economists’ Outlook (pdf). A majority of 72% of the leading chief economists surveyed anticipate global economic conditions to deteriorate in the year ahead, especially across advanced economies, while emerging markets are seen as the main growth engines.

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“The global economy is undergoing a period of profound transformation, marked by persistent short-term disruption and heightened uncertainty as well as long-term structural change,” according to the report.

Economists were the most bullish on East Asia, South Asia, the Pacific, and the Middle East, where the majority of respondents expected moderate growth next year and a significant number expected strong growth. Around 48% see the Middle East showing moderate growth next year, while 34% see it exhibiting strong growth — the highest share across regions.

REMEMBER: The global economy is expected to grow 3% this year, according to the International Monetary Fund, which upgraded its latest forecast on the back of lower-than expected tariffs and a weaker USD. The fund also predicts a slight growth acceleration to 3.1% in 2026, revising up its previous estimate by 0.1 percentage point.

KEY HEADWINDS-

Accelerating geoeconomic fragmentation — and a realignment of supply chains — is seen as the key challenge to global growth, with 82% of the survey respondents expecting it to intensify in the year ahead, hammered by the US’ ongoing tariff spree, the report reads.

Inflationary pressures also remain elevated, especially in the US, where 59% of chief economists anticipate higher inflation next year. Meanwhile, deflation is seen as a major headwind to the Chinese economy.

Debt sustainability is also a growing concern, namely in advanced economies, where 80% of economists anticipate elevated debt vulnerabilities.

Political instability and societal fragmentation topped the frequently cited inhibitors across both advanced and developing countries, with 68% of chief economists flagging this as a greater threat for advanced economies than for developing economies.

Weak or inflexible institutions came in second place among the top challenges, with 58% of respondents considering it as the top constraint for developing economies, which remain well below advanced economies in terms of governance indicators. However, 44% of chief economists surveyed also see institutional rigidity as a headwind in advanced economies, where regulatory complexity is regularly cited by SMEs as their greatest barrier.

Trade barriers and limited global integration was the third obstacle, affirming the need to resolve disputes and enhance openness.

POTENTIAL GROWTH DRIVERS-

Trade openness and market access, as well as resolving trade disputes, was flagged as a top priority, with respondents seeing it a key growth driver for both advanced and developing economies.

AI could also be a key growth driver: Some 68% of respondents expect AI to become commercially disruptive within the next year, up from 45% in April. It’s seen as the main growth driver for advanced economies. Meanwhile, access to capital and resources are seen as crucial growth inputs in developing economies.

Human capital development is seen as the second growth driver overall. It is seen as extremely important for developing markets, with almost two-thirds of the income gap between advanced and developing economies being attributed to disparities in human capital.

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