Dubai, UAE — The global economy is showing signs of stabilisation, but governments have less fiscal room to cushion future shocks, while geopolitical tensions, asset-price corrections and rising living costs threaten the outlook, according to a World Economic Forum survey of chief economists.
Fifty-six percent of economists surveyed expect global economic conditions to remain stable or improve over the next year, a sharp improvement from May, when 89% expected conditions to weaken.
Confidence in the durability of the improvement remains limited. Nearly all respondents, or 97%, cited geopolitical conflicts as a likely source of uncertainty over the next year, while 58% expect asset-price corrections. Only about one-quarter expect the global economy to become more resilient.
The survey was conducted from Aug. 4 to Aug. 20 among chief economists from the public and private sectors.
Fiscal support set to weaken
Fiscal support was the biggest source of global economic resilience since 2020, cited by 69% of respondents. But only 28% expect it to play a similar role over the next 12 months.
Economists instead expect resilience to depend increasingly on flexible supply chains, technological innovation and adaptation in energy markets.
The United States and China were viewed as best placed to withstand future shocks, according to the survey.
AI investment brings growth and cost concerns
AI adoption is expected to accelerate, with 97% of respondents anticipating increased use over the next year and 69% expecting meaningful productivity gains.
About 78% expect data-centre investment to account for a significant share of global economic growth. But 79% also expect data-centre expansion to encounter significant opposition from local communities.
The build-out is also expected to increase pressure on resources. Seventy-eight percent of economists anticipate higher electricity prices and 58% expect water prices to rise as data-centre investment expands.
The employment gains could be more limited. Sixty-one percent do not expect data-centre investment to account for a significant share of global job creation.
The technological gap between the United States and China is also expected to narrow, with 69% of respondents saying Chinese large language models could catch up with US counterparts over the next 12 months.
Trade fragmentation set to deepen
Seventy-seven percent of economists expect geoeconomic fragmentation to increase over the next year, while 55% anticipate higher tariffs in the United States and 43% in Europe.
Trade flows are nevertheless expected to continue expanding. About two-thirds of respondents expect global trade volumes to increase, while 83% anticipate higher Chinese exports to markets outside the United States.
The United States is expected to remain the most favourable business environment for multinational companies, followed by Southeast Asia and Europe. India moved down to fourth place, while China remained fifth.
Growth outlook remains uneven
India, Southeast Asia, Central Asia and the United States received the strongest assessments for growth prospects.
China’s outlook has weakened, with about one-third of economists expecting weak growth. Europe’s outlook improved modestly but remained the weakest among the regions assessed, with 61% expecting weak or very weak growth.
Around one-third of respondents expect unemployment to rise in the United States, China and Europe.
Monetary policy is also expected to diverge. Seventy percent of economists anticipate tighter policy in Japan, compared with 53% in the euro area and 42% in the United States. In China, 49% expect monetary policy to ease.
Living costs threaten real incomes
Cost-of-living pressures are expected to persist, with food cited by 88% of economists as an area where costs are likely to rise. Electricity followed at 83%, and transport at 77%.
Most respondents expect real incomes to stagnate or decline across most regions. Southeast Asia and India were exceptions, with more than 60% anticipating increases in real incomes.
Governments are expected to favour broad measures to ease the pressure. Sixty percent of respondents expect tax reductions on essential goods, while 54% anticipate consumption subsidies and 50% expect price caps.
Only 36% expect governments to reduce taxes specifically for low-income households, while 26% anticipate targeted cash transfers.
The findings point to an economy that has moved away from the acute shock conditions of recent years but remains exposed to geopolitical, fiscal, technological and cost pressures.
