The World Economic Forum Annual Meeting in Davos is set against a backdrop of escalating geopolitical tensions and unprecedented technological investment, as global leaders prepare for what officials describe as potentially challenging diplomatic discussions. Trump's recent threat to impose tariffs on Europe if it does not cede Greenland to the United States has created an atmosphere of uncertainty ahead of the gathering.

Tariff Tensions Dominate Davos Agenda

World Economic Forum President and CEO Borge Brende anticipates difficult conversations at this year's meeting, telling CNBC-TV18 that he expects "quite tough dialogues" and "frank dialogues" around tariff issues. The tariff concerns have persisted for almost a year between the US and various stakeholders, creating ongoing diplomatic friction.

Record AI Investment Surge

Artificial intelligence has emerged as the fastest-growing investment sector globally, with Cathy Li, Head of AI, Data and Metaverse at the World Economic Forum, revealing staggering investment figures. Global AI investment has reached nearly $600 billion since 2010, representing what Li describes as "the fastest large-scale capital reallocation in modern history."

The rapid expansion underscores the global race for AI dominance, with investment growing at an annual rate of approximately 33%.

Critical Funding Shortfalls Identified

The forum has highlighted significant funding gaps across multiple sectors. Global healthcare faces a $200 billion shortfall, according to World Bank estimates, as the US steps back from several multilateral healthcare organizations. Shyam Bishen, Head of the Centre for Health and Healthcare at the WEF, noted that current funding levels fall far short of requirements for building resilient healthcare systems capable of responding to climate change and future pandemics.

Clean energy investment presents another major challenge. Roberto Bocca, Head of Energy and Materials at the WEF, emphasized that meeting global climate goals will require annual investment in clean fuel production to nearly quadruple from approximately $25 billion currently to close to $100 billion by 2030.

Market Volatility and Commodity Surge

Geopolitical tensions have driven significant market movements, with silver crossing the ₹3,00,000 per kilogram threshold on the Multi-Commodity Exchange for the first time. The precious metal reached ₹3,01,315 per kilogram, reflecting investor concerns about trade volatility stemming from Trump's tariff threats.

Global Risk Assessment

The World Economic Forum's latest Global Risks Report identifies geoeconomic confrontation as the primary risk facing the global economy over the next two years. Saadia Zahidi, Managing Director at the WEF, highlighted business leaders' concerns about US trade tariffs, investment screening, access to critical resources, and supply chain disruptions. Geopolitical and state-based conflicts also rank prominently among business risk assessments.

The convergence of these challenges at Davos reflects the complex intersection of technological advancement, geopolitical tension, and economic uncertainty that characterizes the current global landscape.

The global economic outlook has shown modest improvement but remains fragile, with rising debt burdens and shifting trade relationships creating persistent challenges, according to the World Economic Forum's latest Chief Economists' Outlook. The report reveals a complex landscape where tentative stabilisation coexists with significant structural risks that could derail recovery efforts.

Economic Sentiment Shows Gradual Improvement

Surveyed chief economists demonstrate cautious optimism compared to previous assessments. The proportion expecting global economic conditions to weaken over the next year decreased substantially, while those anticipating stronger conditions nearly doubled.

This shift indicates tentative stabilisation rather than broad-based recovery, with uncertainty remaining a dominant theme across global markets.

Debt Crisis Emerges as Central Challenge

Global public debt reached $102.00 trillion in 2024 and is projected to approach 100% of global GDP by 2029, making debt management a defining policy challenge. The risks vary significantly between emerging and advanced economies, with developing nations facing substantially higher vulnerability across multiple categories.

Nearly half of respondents see sovereign debt crises as likely in emerging markets, while views remain split evenly regarding advanced economies. A majority expect governments to rely on higher inflation and tax increases to manage debt burdens, with 53% anticipating debt restructuring or default in emerging economies over the next five years, compared to just 6% for advanced economies.

Fiscal Pressures Reshape Government Spending

Elevated debt levels are fundamentally reshaping government spending priorities across both advanced and emerging economies. Defence spending is almost unanimously expected to rise, alongside digital infrastructure and energy investment, partly reflecting AI-related power demand. However, economists expect spending on environmental protection to decline in both economic categories, while education, transport, research and innovation face flat or constrained budgets.

Trade Patterns Continue Strategic Realignment

Global trade volumes demonstrated resilience, crossing $35.00 trillion in 2025 with 7% year-on-year growth. However, underlying patterns continue shifting amid strategic competition. While US-China tariffs are likely to remain well above pre-2025 levels, competition increasingly centres on technology controls and critical minerals. A large majority expect bilateral and regional trade agreements to expand, with Chinese exports continuing redirection away from the US towards Asia, Europe and other emerging markets. Foreign direct investment flows are expected to tilt further towards the US, with a weakening outlook for China.

Regional Growth Prospects Show Sharp Divergence

Growth expectations vary dramatically across regions, reflecting different structural challenges and opportunities. South Asia stands out with 66% of chief economists expecting strong or very strong growth, driven primarily by India. The US outlook has improved, with most respondents expecting moderate growth, while Europe faces the weakest prospects, with over half anticipating weak growth.

World Economic Forum Managing Director Saadia Zahidi summarised the findings, noting that "surging AI investment, debt approaching critical thresholds and trade realignments" represent the defining trends shaping 2026. These findings will inform discussions at the World Economic Forum's Annual Meeting in Davos, as policymakers and business leaders navigate an increasingly fragmented global economy.