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.

Artificial intelligence is emerging as the defining macroeconomic force shaping global growth, jobs and productivity, according to the World Economic Forum's latest Chief Economists' Outlook. However, the benefits are expected to arrive unevenly across regions, with the United States positioned to gain most rapidly from AI-driven productivity improvements.

The survey reveals significant regional disparities in how quickly AI-led productivity gains are expected to materialise, with advanced economies substantially outpacing developing nations.

Regional Timeline for AI Productivity Gains

The United States leads expectations for rapid AI productivity benefits, with economists projecting gains within approximately one year. Other regions face considerably longer timelines before realising similar benefits.

Growth Impact Concentrated in Advanced Economies

Economists expect AI to have far greater impact on growth in advanced economies compared to emerging markets. The disparity is particularly stark between developed and developing regions.

Mixed Employment Outlook

Two-thirds of chief economists surveyed expect modest job losses from AI over the next two years, reflecting early disruption as automation accelerates across sectors. However, views diverge sharply over the longer term, with 57% anticipating net job losses over a 10-year horizon while nearly one-third expect AI-driven job creation as new occupations emerge.

The long-term employment picture remains highly contested, underlining uncertainty around how quickly labour markets can adapt to AI transformation.

Key Economic Trends

Saadia Zahidi, Managing Director at the World Economic Forum, highlighted 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
• Trade realignments

The findings are based on 36 responses from chief economists, surveyed between November 19 and December 3, 2025, setting the stage for discussions at the World Economic Forum's 56th Annual Meeting in Davos-Klosters from January 19–23, 2026.