Abu Dhabi:According to the World Economic Forum's Chief Economists' Outlook, the global economy is expected to stabilize, although the fiscal support that has mitigated shocks since 2020 is unlikely to continue playing the same role in the near future.
According to Emirates News Agency,A majority of surveyed chief economists, 56%, anticipate that the global economic outlook will either remain stable or improve, marking a notable shift from May when 89% expected conditions to worsen. Despite this improvement, confidence in sustained stabilization is limited, with 97% of respondents identifying geopolitical conflicts as a potential source of uncertainty over the next year. Additionally, 58% foresee asset-price corrections, and only 25% believe the global economy will become more resilient.
Attilio Di Battista, Head of Economic Growth and Transformation at the World Economic Forum, highlighted the high level of uncertainty due to geopolitical volatility, potential asset-price corrections, scrutiny of AI investments, and ongoing cost-of-living pressures. Di Battista emphasized the importance of strengthening resilience as fiscal capacity becomes more constrained.
Fiscal support has been a key component of economic resilience since 2020, cited by 69% of economists surveyed. However, only 28% expect it to maintain that role in the coming 12 months. Future resilience is anticipated to rely more on flexible supply chains, technological innovation, and energy-market adaptation, with the United States and China perceived as best positioned to withstand future shocks.
Over the next year, nearly all respondents (97%) expect an increase in AI adoption, and 69% believe it will lead to significant productivity gains. While 78% anticipate data-center investment to drive global growth, 79% foresee local community opposition to its expansion.
Although data-center investments are not expected to significantly boost job creation, they are likely to increase electricity (78%) and water (58%) prices. The AI competition between China and the United States is expected to narrow, with 69% predicting that Chinese large language models will catch up to their US counterparts within the year.
Economists predict rising living costs, especially in food (88%), electricity (83%), and transport (77%). Real incomes are expected to decrease or stagnate in most regions, except for South-East Asia and India, where over 60% of respondents anticipate income growth.
Governments are likely to implement broad, visible measures such as tax reductions on essential goods (60%), consumption subsidies (54%), and price caps (50%), while fewer expect tax reductions for low-income households (36%) or targeted cash transfers (26%).
Source: Emirates News Agency