The latest 'Chief Economists’ Outlook' report of the World Economic Forum (WEF), published on Tuesday, shows that 56% of the chief economists surveyed believe that the global economy is stabilising or improving. This represents a dramatic turnaround from the previous Outlook, published in May, in which 89% had expected the global economy to weaken.

However, this latest survey also showed that there was limited confidence that this improvement would hold. No less than 97% saw international political conflicts as probably causing instability over the coming year, while 58% expected asset-price corrections and a mere 25% thought that the global economy would achieve greater resilience.

“Chief economists expect the global economy to stabilise, but uncertainty remains high with geopolitical volatility, potential asset-price corrections, greater scrutiny of AI investment and persistent cost-of-living pressures,” observed WEF Economic Growth and Transformation head Attilio Di Battista. “Government support played a critical role in navigating successive crises, but fiscal capacity is likely to be more constrained going forward. The priority now is to strengthen the foundations of resilience before the next shock arrives.”

Regarding AI, 97% of the chief economists saw it being increasingly adopted over the next 12 months, with 69% thinking that it would result in significant gains in productivity, while 78% predicted that investment in data centres would be a major driver of economic growth. However, 61% did not see data centre investment creating a significant number of jobs, while 78% saw it as driving up electricity prices and 58% doing the same with water prices. And 79% forecast that data-centre construction would face significant opposition from local communities.

When it came to the AI rivalry between China and the US, 69% expected Chinese large language models to catch up with the US ones within the next 12 months.

The chief economists also expected the cost of living to rise, with 88% expecting higher food prices, 83% higher electricity rates, and 77% higher transport costs. Only those in India and Southeast Asia expected real incomes to increase, while everywhere else they were expected to stagnate or fall. Likely governmental responses to rising living costs were predicted to be tax cuts on essential goods (foreseen by 60%), subsidies on consumption (54%) and price caps (50%), with only 36% of the chief economists expecting tax cuts for low-income families and 26% predicting targeted cash transfers.

Returning to the macroeconomy, 69% saw government fiscal support as having been the main source of resilience in the global economy since 2020. But only 28% expected that to be the case over the next 12 months. Future resilience was predicted to increasingly rely on flexible supply chains, innovative technologies, and adaptation in the energy markets. The US and China were regarded as the countries which could best withstand shocks.

Further, 77% of chief economists believed that international politics would become increasingly fragmented over the coming year. The proportion expecting tariff increase in the US was 55%, and those expecting the same in Europe, 43%. But 66% still expected trade volumes to increase and 83% believed that Chinese exports to non-US markets would grow.

However, about 33% predicted only weak growth in China, while 61% believed that Europe would see only weak or very weak growth. The strongest performing regions were expected to be India, Southeast Asia, Central Asia and the US. Some 33% forecast that unemployment would increase in China, Europe and the US. Monetary policy was predicted by 70% to become tighter in Japan, with 53% expecting the same in the euro area and 42% in the US. On the other hand, 49% foresaw looser monetary policies in China.  

Regarding the most favourable environment for multinational companies, the US was ranked in first place. Southeast Asia was second (it ranked third in the last survey) and Europe third (previously fourth). India fell to fourth place, while China stayed in fifth place.