KUALA LUMPUR, May 28 — The global economic growth outlook this year is “divided” and “under strain”, with weak prospects in North America, resilience in the Asia-Pacific region, and cautious optimism in Europe, according to the World Economic Forum (WEF).
WEF, in a statement following the publication of its Chief Economist Outlook report today, said the global economic outlook has worsened since the start of the year, as rising economic nationalism and tariff volatility fuel uncertainty and risk stalling long-term decision-making.
“The report reveals a strong majority (79 per cent) of surveyed economists view the current geoeconomic developments as signs of a significant structural shift for the global economy rather than a temporary disruption,” it said.
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 such as artificial intelligence (AI), said WEF managing director Saadia Zahidi.
“These steps are essential for navigating today’s economic headwinds and securing long-term resilience and growth,” she said.
WEF said global uncertainty is perceived as exceptionally high by 82 per cent of chief economists.
“While a narrow majority (56 per cent) expect conditions to improve over the next year, concerns persist. Nearly all of the chief economists (97 per cent) place trade policy among the areas of highest uncertainty, followed by monetary policy (49 per cent) and fiscal policy (35 per cent).
“This uncertainty is expected to weigh on key economic indicators, including trade volumes (70 per cent), gross domestic product (GDP) growth (68 per cent) and foreign direct investment (62 per cent),” it said.
It said most chief economists (87 per cent) anticipate that businesses will respond to uncertainty by delaying strategic decisions, increasing recession risks.
“Debt sustainability is also a rising concern, cited by 74 per cent of respondents for both advanced and developing economies.
“An overwhelming majority (86 per cent) expect governments to meet rising defence spending needs through increased borrowing, potentially crowding out investment in public services and infrastructure,” it said.
WEF said AI is poised to drive the next wave of economic transformation, unlocking significant growth potential while also introducing serious risks.
It said nearly half (46 per cent) of chief economists expect AI to deliver a modest global real GDP boost of zero to five percentage points over the next decade, with a further 35 per cent projecting gains of five to 10 points.
“Key growth drivers include task automation (68 per cent), accelerated innovation (62 per cent) and worker augmentation (49 per cent).
“Despite its potential, concerns persist: 47 per cent expect net job losses over the next decade, compared to just 19 per cent who expect gains,” it said.
Above all, WEF said respondents highlighted the misuse of AI for disinformation and societal destabilisation as the top risk to the economy (53 per cent).
“Other key risks include rising concentration of market power (47 per cent) and disruption of existing business models (44 per cent),” it said.
To fully harness AI’s potential, WEF said that the chief economists emphasised the need for bold action from both governments and businesses.
“For governments, top priorities include investing in AI infrastructure (89 per cent), promoting adoption across key industries (86 per cent), facilitating AI talent mobility (80 per cent), and investing in upskilling and redeployment (75 per cent).
“For businesses, the focus is on adapting core processes to integrate AI (95 per cent), reskilling employees (91 per cent) and training leadership to steer AI-driven transformation (83 per cent),” it added.
— Bernama
