The global economy is showing signs of settling after years of disruption, but economists remain cautious about how durable that stability will be as governments face tighter fiscal constraints and households continue to grapple with rising costs.
The latest World Economic Forum Chief Economists’ Outlook found that 56% of economists surveyed expect global economic conditions either to remain stable or improve over the coming year. That marks a notable shift from May, when 89% had anticipated a deterioration.
Yet the improved outlook comes with substantial reservations. Geopolitical conflicts were identified by 97% of respondents as a major source of uncertainty over the next 12 months. Meanwhile, 58% foresee possible corrections in asset prices, while only about one in four believe the global economy will become more resilient.
Attilio Di Battista, Head of Economic Growth and Transformation at the World Economic Forum, said the outlook points to greater stability but continued exposure to geopolitical volatility, asset-price risks, scrutiny of artificial intelligence investment and persistent cost-of-living pressures.
Fiscal support losing its role as the main shock absorber
Government spending and fiscal measures have been a crucial buffer for the world economy since 2020, with 69% of economists identifying fiscal support as the biggest contributor to resilience during that period.
That role is expected to diminish. Only 28% believe fiscal support will be a major source of resilience over the next year, reflecting concerns that governments have less room to respond to another major economic shock.
Economists instead point to more adaptable supply chains, technological advances and changes in energy markets as increasingly important sources of economic resilience. The United States and China are viewed as having comparatively strong capacity to absorb future shocks.
AI investment surges, bringing new pressure points
Artificial intelligence remains one of the strongest sources of optimism in the economic outlook. Nearly all respondents, or 97%, expect AI adoption to accelerate over the next year, while 69% believe it will generate meaningful productivity improvements.
Data centres are also expected to become an increasingly important part of the global investment cycle. About 78% of economists anticipate data-centre spending contributing significantly to global growth.
The rapid expansion is not without friction. Some 79% expect local communities to push back against new data-centre developments. Electricity prices are expected to come under pressure by 78% of respondents, while 58% foresee higher water costs.
The employment impact is also being questioned, with 61% saying they do not expect data-centre investment to become a major source of global job creation.
The technology race between the US and China could also become more competitive. Around 69% of economists expect Chinese large language models to close the gap with US counterparts over the next year.
Trade becomes more fragmented
Economic fragmentation is expected to deepen, with 77% of economists anticipating greater geoeconomic division over the next 12 months.
Tariffs could add to the pressure. About 55% expect the US to raise tariffs, while 43% foresee increases in Europe.
Despite the fragmentation, global trade is not expected to contract broadly. Two-thirds of respondents anticipate higher global trade volumes, while 83% expect Chinese exports to markets outside the US to increase.
The US continues to be viewed as the most attractive business environment for multinational companies. South-East Asia and Europe follow, while India ranks fourth and China fifth.
Growth remains uneven across regions
Economic prospects have improved in several major regions, although the recovery is far from uniform.
India, South-East Asia, Central Asia and the US receive some of the strongest growth assessments. China’s outlook has weakened, with roughly one-third of economists anticipating weak growth.
Europe has made a modest improvement but remains the region facing the weakest expectations, with 61% of respondents forecasting weak or very weak growth.
Employment conditions could also diverge. Around one-third of economists expect unemployment to rise in the US, China and Europe.
Monetary policy is likely to move in different directions as economies respond to varying inflation and growth conditions. Some 70% expect tighter policy in Japan, compared with 53% in the euro area and 42% in the US. In China, 49% anticipate monetary easing.
Household budgets remain under pressure
The cost of living is emerging as one of the most persistent concerns in the global outlook.
Food prices are expected to rise by 88% of respondents, followed by electricity at 83% and transport at 77%.
Real incomes are expected to stagnate or decline in most regions. India and South-East Asia stand apart, with more than 60% of economists in each region anticipating increases in real incomes.
Governments are expected to rely largely on broad measures to cushion consumers. Tax reductions on essential goods, consumption subsidies and price controls are among the responses economists expect to see most frequently.
By comparison, fewer respondents anticipate targeted assistance, with 36% expecting tax reductions aimed specifically at lower-income households and 26% forecasting targeted cash transfers.
The overall picture is one of an economy moving toward greater stability, but without the broad safety net that helped absorb previous shocks. As fiscal space narrows, the resilience of supply chains, technology, energy systems and household incomes is likely to become increasingly important.
