Economists see global growth coming under strain amid uncertainty: WEF

Fibre2Fashion

2 days ago

Uncertainty is the defining theme of the global economic environment, according to the World Economic Forum's (WEF) latest Chief Economists Outlook, which said 82 per cent consider it very high now, while 56 per cent anticipate easing over the next year.
Ninety-seven per cent placed trade policy among the areas of highest uncertainty, followed by monetary policy (49 per cent) and fiscal policy (35 per cent).
Uncertainty defines the global economic environment, the WEF's latest Chief Economists Outlook noted; 82 per cent see it as very high now. The growth outlook is divided, with weak prospects in North America, APAC resilience and cautious optimism in Europe. The most optimism about a strong economic expansion in South Asia, with India set to be the primary engine of growth this year and the next.
Eighty-seven per cent anticipated that businesses will respond to uncertainty by delaying strategic decisions, increasing recession risks.
The growth outlook is divided, with weak prospects in North America, resilience in the Asia-Pacific and cautious optimism in Europe.
In Europe, while growth remains subdued, respondents pointed to emerging signs of improvement, driven by expansionary fiscal policy and continued monetary easing.
The respondents were largely aligned in their assessment that higher tariffs and persistent trade tensions would fuel inflation and suppress trade volumes, and persistent uncertainty would inflict significant economic damage on the global economy, including through paralysed decision-making and heightened risks of policy mis-coordination, the report's executive summary said.
Artificial intelligence (AI) is expected to drive growth, but 47 per cent anticipate related net job losses.
The economists were the most optimistic about a strong economic expansion in South Asia, with India set to be the primary engine of growth this year and the next.
They, however, warned of the overall global growth coming under strain from trade policy shocks and AI disruption.
Respondents were clear that overall growth prospects were weakening, with the shift in trajectory being most pronounced in the United States, where the majority of respondents expected weak or very weak growth for the remainder of 2025, alongside rising inflation and a weakening dollar.
China is also pursuing fiscal expansion in an effort to bolster growth, but the chief economists were divided on whether it would reach its target of 5-per cent gross domestic product (GDP) growth this year, given a range of both external and domestic economic challenges.
A majority of surveyed economists saw the current US economic policy as having a lasting global impact, with 87 per cent expecting it to delay strategic business decisions and heighten recession risks.
Although the rerouting of Chinese exports is casting a shadow over the South Asian region's economic prospects, a recently concluded trade deal between India and the United Kingdom was another source of optimism, the report said.
Globally, public debt concerns were seen mounting as defence spending rises, with 86 per cent of chief economists expecting increased government borrowing.
Seventy-nine per cent of respondents viewed the current geo-economic developments as signs of a significant structural shift for the global economy rather than a temporary disruption.
Other key risks included rising concentration of market power (47 per cent) and disruption of existing business models (44 per cent).
Fibre2Fashion News Desk (DS)