Global economy faces growing uncertainty despite AI optimism

The global economic outlook has deteriorated sharply, with nearly nine in ten chief economists expecting weaker growth over the next year amid escalating geopolitical tensions and persistent supply chain disruptions.

According to the latest Chief Economists’ Outlook released by the World Economic Forum, 89% of surveyed economists believe global growth will slow over the next 12 months. The shift marks a reversal from the cautious optimism expressed earlier this year and is largely attributed to the conflict in the Middle East and the closure of the Strait of Hormuz, a critical global shipping route.

The report found that 94% of economists expect global inflation to rise as higher energy and food prices ripple through international markets. Many respondents believe the economic impact of the Strait of Hormuz disruption is already more severe than last year’s tariff-related turmoil and could approach the scale of the Covid-19 crisis if the closure continues into the second half of the year.

“The longer the disruption lasts, the heavier the long-term cost for those who can least afford it,” said Saadia Zahidi, managing director of the World Economic Forum.

The Middle East and North Africa are expected to be the hardest-hit regions. Around 88% of economists surveyed anticipate weak or very weak growth there, representing the sharpest decline in confidence among all regions assessed.

Inflation, stagflation

Elsewhere, the outlook remains mixed. Sub-Saharan Africa faces mounting inflationary pressure, while Europe is increasingly vulnerable to stagflation as slowing growth combines with rising prices. By contrast, the economies of India and the United States are expected to remain relatively resilient, supported by strong domestic demand and investment.

Despite growing concerns, economists do not foresee a global recession in the coming year. Only 13% of respondents believe a recession is likely, although many expect heightened volatility in financial markets. Nearly 80% anticipate increased instability in private debt markets, while significant majorities also expect volatility in public debt and equity markets.

Artificial intelligence remains one of the brighter spots in the global outlook. The survey found that 92% of economists expect AI adoption to increase over the next year. However, expectations regarding rapid productivity gains have become more cautious.

While sectors such as information technology and education are expected to continue benefiting from AI, industries including engineering, construction, healthcare and utilities are now expected to take longer to realise significant productivity improvements.