Global economic outlook darkens as geopolitical risks rise but AI still offers long-term hope — WEF Report

Global Growth Outlook Worsens Amid Rising Geopolitical Tensions

• Nearly nine in ten chief economists surveyed expect global growth to weaken over the coming year, but only 13% think there could be a global recession.
• According to the survey, 94% expect global inflation to rise as the closure of the Strait of Hormuz drives up energy and food costs and disrupts supply chains.
• 92% expect greater AI adoption over the coming year, but optimism about the speed of productivity impact across industries has cooled.

The global economic outlook is increasingly fragile, weighed down by geopolitical instability even as artificial intelligence (AI) continues to offer longer-term growth potential, according to the latest Chief Economists’ Outlook released by the World Economic Forum.

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The report reveals a sharp deterioration in sentiment over recent weeks, with nearly nine in ten chief economists surveyed expecting global economic growth to weaken over the next 12 months. This marks a reversal from the cautious optimism recorded earlier in the year.

Middle East Conflict and Strait of Hormuz Closure Raise Alarm

At the centre of growing concern is the ongoing conflict in the Middle East and the closure of the Strait of Hormuz, a critical global energy and trade chokepoint. Chief economists now view the disruption as significantly more damaging than last year’s tariff-related shocks.

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Respondents warn that if the closure continues into the second half of the year, its economic impact could match that of the COVID-19 crisis. Global supply chains would face severe disruptions. Energy markets and food prices would also experience cascading effects as a result. Reflecting these risks, 94% of surveyed economists expect global inflation to rise over the coming year.

“Only months ago, the Chief Economists community was cautiously optimistic. The conflict in the Middle East changed that. The longer the disruption lasts, the heavier the long-term cost for those who can least afford it,” said Saadia Zahidi, Managing Director at the World Economic Forum.

Uneven Regional Economic Outlook

The economic fallout is expected to vary significantly by region.

• Middle East and North Africa: The sharpest reversal in sentiment, with 88% of economists now expecting weak or very weak growth.
• Sub-Saharan Africa: Inflation expectations have surged and are now the highest among all regions surveyed.
• Europe: Growing stagflation risks as weakening growth collides with persistent inflationary pressures.
• India and the United States: Seen as relatively resilient, supported by strong domestic demand and ongoing investment.

Low Recession Risk, but Heightened Market Volatility

Despite the gloomy outlook, most economists do not foresee a full-scale global recession within the next 12 months.

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However, they caution that economic resilience remains limited and highly dependent on how long geopolitical disruptions persist.

Financial markets are expected to face heightened stress:

• 79% anticipate increased volatility in private debt markets
• 74% expect greater volatility in public debt markets
• 68% foresee rising stock market volatility

Signs of strain in private credit markets are already emerging, the report notes.

AI Remains a Growth Tailwind, But Expectations Are Tempered

Artificial intelligence continues to be viewed as a positive force, with 92% of chief economists expecting increased AI adoption over the next year. However, optimism around the speed of productivity gains has cooled.

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Compared to expectations in January 2026, economists now believe meaningful productivity improvements from AI will take longer to materialise across most sectors. Only information technology and education have maintained stable expectations. The most delayed gains are now projected in engineering, construction, utilities, healthcare, and care services.

Outlook: Caution in the Short Term, Transformation in the Long Term

The findings highlight a global economy caught between near-term geopolitical shocks and longer-term technological transformation.

Economists acknowledge that AI adoption presents structural upside for global growth. However, they warn that unresolved conflicts remain a significant threat.

Prolonged supply chain disruptions could also severely undermine economic prospects in the coming months.