WEF: Global economy deteriorates significantly amid trade shocks and AI disruption, warn chief economists
US President Donald Trump. The report underscores the impact of recent US trade policy shocks, which have shaken confidence in the global economic order.
Image: Jim Watson/ AFP
The global economic outlook has deteriorated significantly since the start of 2025, driven by volatile trade policies and the disruptive rise of artificial intelligence (AI), according to a World Economic Forum (WEF) report released on Wednesday.
The Chief Economists Outlook highlights growing uncertainty, with 79% of surveyed economists viewing current geoeconomic shifts as a structural transformation rather than a fleeting disruption, posing risks to long-term growth and stability.
The report underscores the impact of recent US trade policy shocks, which have shaken confidence in the global economic order. On April 2, the U.S. announced sweeping tariff hikes, including a 10% baseline on most global goods and significantly higher rates targeting countries with trade surpluses, notably China. This triggered market turmoil and retaliatory measures, with China imposing 145% tariffs on US imports and restricting critical mineral exports. Although both nations paused most tariff escalations by May 12, reducing bilateral tariffs by 115 percentage points, the volatility has left lasting uncertainty.
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'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 Saadia Zahidi, the managing director at the WEF.
The survey reveals that 82% of chief economists rate global uncertainty as 'very high,' with 97% citing trade policy as the primary source, followed by monetary policy (49%) and fiscal policy (35%). This uncertainty is expected to suppress trade volumes (70%), gross domestic product (GDP) growth (68%), and foreign direct investment (62%).
Of note 87% of respondents warn that businesses will delay strategic decisions, heightening recession risks, while 86% anticipate governments will increase borrowing to meet rising defense spending needs, potentially crowding out investments in public services.
Regional growth prospects diverge sharply. In the US, 77% of economists predict weak or very weak growth through 2025, compounded by high inflation (79%) and a weakening dollar (76%). Europe shows cautious optimism, driven by fiscal expansion in countries like Germany, marking a shift from years of subdued growth. In China, economists are split on whether the country will meet its 5% GDP growth target, given domestic and external challenges. South Asia stands out, with 33% expecting strong growth.
AI emerges as both a growth catalyst and a risk. While 46% of economists project AI will boost global GDP by up to 5 percentage points over the next decade, 47% foresee net job losses, compared to just 19% anticipating gains. Key growth drivers include task automation (68%) and accelerated innovation (62%), but risks like AI-driven disinformation (53%) and market concentration (47%) loom large.
Economists urge governments to invest in AI infrastructure (89%) and promote adoption in key industries (86%), while businesses must adapt processes (95%) and reskill workers (91%) to harness AI's potential.
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