Global outlook brightens cautiously for 2026 as AI, debt and trade realignment reshape growth: WEF

The global economic outlook has shown modest improvement heading into 2026, but uncertainty remains high as a complex mix of elevated asset valuations, rising debt burdens, geoeconomic realignment and the rapid deployment of artificial intelligence (AI) continues to reshape growth prospects.

This is according to the World Economic Forum’s (WEF) latest Chief Economists’ Outlook published on Friday.

While caution still dominates sentiment, the survey points to a measurable easing in pessimism compared with late 2025.

Some 53% of chief economists now expect global economic conditions to weaken over the coming year, down sharply from the 72% who held this view in September 2025. The shift suggests a growing belief that the global economy may avoid a severe downturn, even as structural vulnerabilities deepen.

"The Chief Economists survey reveals three defining trends for 2026: surging AI investment and its implications for the global economy; debt approaching critical thresholds with unprecedented shifts in fiscal and monetary policies; and trade realignments,” said Saadia Zahidi, managing director for the WEF.

“Governments and companies will have to navigate an uncertain near-term environment with agility while continuing to build resilience and invest in the long-term fundamentals of growth.”

AI stands out as both a key engine of growth and a potential source of instability. Concentrated gains in AI-related equities, particularly in the United States, have split opinion among economists.

A narrow majority, 52%, expect AI-linked US stocks to decline over the next year, while 40% foresee further gains. Should valuations correct sharply, nearly three-quarters of respondents believe the effects would reverberate across the global economy.

Other asset classes face more subdued expectations. Some 62% of chief economists anticipate further declines in cryptocurrencies following recent market turbulence, while 54% believe gold has peaked after strong rallies, reflecting a more cautious outlook for traditional safe havens.

Despite valuation concerns, expectations for AI-driven productivity gains remain robust. Around four in five chief economists expect meaningful productivity improvements within two years in both the United States and China.

The information technology sector is expected to lead adoption, with nearly three-quarters anticipating near-term gains. Financial services, supply chains, healthcare, engineering and retail are also identified as “fast movers”, with productivity gains expected within one to two years.

Firm size is expected to play a decisive role in the speed of adoption. Some 77% of respondents believe companies with more than 1 000 employees will realise meaningful productivity gains within two years, highlighting the advantage of scale in deploying AI technologies.

The employment implications of AI are expected to evolve unevenly. In the short term, two-thirds of chief economists anticipate modest job losses over the next two years.

Over the longer term, views diverge sharply, with 57% expecting net job losses over the next decade, while 32% foresee net gains as new occupations and industries emerge.

Rising debt levels are emerging as a central policy challenge, particularly as governments face mounting spending pressures.

Defence spending is expected to increase almost universally, with 97% of chief economists anticipating rises in advanced economies and 74% in emerging markets. Spending on digital infrastructure and energy is also projected to grow, reflecting strategic priorities linked to security and the green transition.

By contrast, most other areas of public spending are expected to remain stable.

A majority of respondents anticipate declining expenditure on environmental protection in both advanced (59%) and emerging economies (61%), underscoring increasingly difficult fiscal trade-offs.

Concerns over sovereign debt are most acute in emerging markets. Nearly half of surveyed economists believe sovereign debt crises are likely in emerging economies over the next year, while views are evenly split for advanced economies.

To manage debt burdens, governments are widely expected to tolerate higher inflation and pursue tax increases. More than half of respondents also anticipate debt restructuring or defaults in emerging markets over the next five years.

Global trade and investment patterns are also being reshaped by a more fragmented and competitive environment.

Chief economists expect tariffs between the US and China to remain largely stable, but foresee intensifying competition in other areas. Strong majorities expect US technology export restrictions on China, as well as Chinese restrictions on critical minerals, to persist or increase.

As a result, bilateral and regional trade arrangements are expected to proliferate. An overwhelming 94% of respondents foresee an increase in bilateral trade deals, while 69% anticipate growth in regional trade agreements. Chinese exports to non-US markets are expected to continue rising, although economists are divided on the outlook for overall global trade volumes.

Growth prospects vary widely by region.

South Asia leads the outlook, driven by strong growth in India, while East Asia, the Middle East and North Africa are expected to post moderate to solid growth. The US outlook has improved, China faces mixed prospects, and Europe continues to confront the weakest growth expectations.

The Chief Economists’ Outlook will inform discussions at the World Economic Forum’s Annual Meeting in Davos-Klosters from Monday to Friday, where global leaders will gather under the theme “A Spirit of Dialogue” to navigate an increasingly uncertain global economy.

BUSINESS REPORT