Digital infrastructure and energy investment are also expected to increase, while spending on environmental protection is forecast to decline in both advanced and emerging economies—a shift that may carry longer-term consequences despite near-term fiscal pressures. Over a five-year horizon, more than half of economists expect debt restructuring or defaults to occur in emerging markets, compared with just 6 per cent for advanced economies. According to the latest Chief Economists’ Outlook published by the World Economic Forum in January 2026, uncertainty remains elevated despite modest improvements in headline expectations. The survey reveals that 53 per cent of chief economists now expect global economic conditions to weaken in the year ahead, a notable improvement from 72 per cent in September 2025. East Asia and the Pacific are expected to maintain solid momentum, while the Middle East and North Africa region is projected to achieve moderate to strong growth, supported by diversification efforts and investment inflows. The outlook for the United States has improved since late 2025, with most economists expecting moderate growth, though only a small minority foresee strong expansion. The global economy has shown signs of relative resilience entering 2026, but leading economists remain cautious as risks surrounding asset prices, public debt, and geoeconomic tensions continue to build. Asset valuations, debt sustainability, and geoeconomic fragmentation pose meaningful risks, while technological transformation continues to reshape productivity, employment, and capital allocation. For policymakers, businesses, and investors alike, the message is clear: resilience will depend less on headline growth rates and more on adaptability, balance-sheet strength, and strategic positioning in an increasingly fragmented global economy. This divergence underscores the growing importance of institutional strength and fiscal credibility in shaping economic resilience. Trade and Investment Realignments Accelerate The outlook also highlights accelerating changes in global trade patterns. Nearly one-third of surveyed economists are concerned about the risk of sovereign debt crises in advanced economies, while close to half see such risks as likely in emerging markets. To manage rising debt burdens, a majority of economists expect governments to rely on higher inflation and increased tax revenues. Gold, which has benefited from heightened geopolitical and inflationary uncertainty, is also viewed with caution, with 54 per cent of respondents believing it has already peaked. At the same time, economists acknowledge that AI is likely to deliver productivity gains over the medium term. Nearly all respondents foresee an increase in bilateral trade deals, and 69 per cent expect further growth in regional trade agreements. Chinese exports to non-US markets are expected to rise, reflecting diversification efforts, while economists remain divided on the future direction of overall global trade volumes. Importantly, 74 per cent believe that a sharp correction in AI equities would have spillover effects across the global economy, reflecting the sector’s growing systemic relevance. Other asset classes also face headwinds. Europe faces the weakest prospects, with more than half of respondents expecting weak growth in the year ahead. A Delicate Balance Ahead Taken together, the findings suggest that the global economy is entering 2026 in a state of cautious balance. Instead, economists point to a complex environment shaped by uneven regional growth, asset valuation concerns, rising sovereign debt burdens, and ongoing realignment of global trade and investment flows. Asset Prices Under Scrutiny One of the most prominent concerns highlighted in the outlook relates to asset valuations, particularly in technology-driven markets. Artificial intelligence has attracted unprecedented levels of investment over the past two years, but economists are increasingly divided on whether current valuations are sustainable. A narrow majority of respondents, 52 per cent, expect AI-related stocks in the United States to decline over the next year, while 40 per cent anticipate further gains. In emerging markets, expectations are similarly elevated. Defence spending is projected to rise almost universally, reflecting heightened geopolitical tensions. Foreign direct investment flows are also shifting, with 57 per cent expecting increased inflows into the United States, compared to just 9 per cent for China. Uneven Regional Growth Outlook Growth expectations vary sharply by region. In response, global trade is becoming more regionalised. Larger companies are expected to benefit first, reinforcing concerns about uneven distribution of gains across firms and labour markets. Debt Pressures Shape Policy Choices Public debt has emerged as a central challenge for governments worldwide. While tariffs between the United States and China are expected to remain largely stable, competition is intensifying through export controls, technology restrictions, and critical mineral policies. More than 90 per cent of economists expect US technology export restrictions on China to remain in place or increase, while 84 per cent anticipate similar constraints on Chinese critical mineral exports. South Asia stands out as the strongest performer, with two-thirds of economists anticipating strong or very strong growth, driven primarily by India. In advanced economies, 67 per cent anticipate inflation being used as a debt-management tool, while 62 per cent expect tax increases. Around 80 per cent expect measurable productivity improvements within two years in both the United States and China, particularly in information technology, financial services, supply chains, healthcare, engineering, and retail. Nearly two-thirds of economists expect cryptocurrency prices to fall further following recent market turbulence. Growth has not collapsed, but vulnerabilities are accumulating beneath the surface. While this shift suggests reduced immediate downside risk, it does not signal a return to stability.
