The global economy will likely face significant challenges in 2025, with 56% of chief economists surveyed expecting conditions to weaken.
This was the outcome of the latest Chief Economists Outlook from the World Economic Forum (WEF). The WEF holds its annual meeting in Davos, Switzerland, on Monday. Only 17% of the economists foresaw an improvement, pointing to heightened uncertainty in key regions, and the need for measured policy responses worldwide, the authors of the reported said.
“The latest Chief Economist’s Outlook reveals a global economy under considerable strain,” said WEF Head of Economic Growth and Transformation Angus Collins.
The economists believed that the US is poised for a short-term boost – with 44% of them predicting strong growth in 2025, up from 15% when they were asked in August last year, but the outlook remains less optimistic for other major economies for the year ahead.
Europe continued to rank as the weakest region for the third consecutive year, with 74% expecting weak or very weak growth.
China’s economic momentum was projected to slow amid subdued consumer demand and weaker productivity.
“The growth outlook is at its weakest in decades and political developments both domestically and internationally highlight how contested economic policy has become. In this environment, fostering a spirit of collaboration will require more commitment and creativity than ever,” said Collins.
The new report highlighted the significance of the recent US presidential election, with 61% of chief economists characterizing the impact for the global economy, as “a long-term shift rather than a short-term disruption.”
Major changes were expected in areas such as trade, migration, deregulation, fiscal policy and industrial policy. Their solid outlook for US growth in 2025 was in line with their expectation of near-term stimulus and of rising wages. However, almost all expected a rise in public debt levels (97%) and higher inflation (94%)..
Pressures on the world’s economic interconnectedness were expected to continue. A vast majority of respondents (94%) predicted further fragmentation of goods trade over the next three years, while 59% expect services trade to follow a similar path.
More than three-quarters also expected higher barriers to labour mobility to be put into place, while almost two-thirds pointed to rising constraints on technology and data transfers.
Nearly half of chief economists anticipated an increase in global trade volumes in 2025. However, a big majority expected trade tensions to intensify between major powers and more widely.
Protectionism was named as the primary factor that would drive global trade changes in 2025, with other contributors including conflict, sanctions and national security concerns. Some 82% of respondents predicted greater trade regionalisation over the next three years, with a continuing shift from goods to services.
In September, the WEF’s Chief Economists Community said in a report there were then reasons for cautious optimism, including a continued gradual easing of inflation rates and shift to looser monetary policy, but the prolonged sluggish pace of global growth, compounded by heightened political volatility, had left many countries vulnerable to economic shocks, while debt dynamics were undermining efforts by governments to boost growth, leaving countries poorly prepared for the next downturn.
Business Report