The global economic outlook has showed slight improvement but remains delicate, as persistent risks from rising debt levels, constricting fiscal space, and changing trade dynamics continue to pose challenges, according to the latest Chief Economists’ Outlook from the World Economic Forum.
While 53% of chief economists surveyed anticipate a decline in global economic conditions over the next year, this is a significant improvement from September 2025, when 72% shared that sentiment. Concurrently, the percentage expecting stronger global conditions increased to 19% from 11%, indicating a tentative stabilization rather than a comprehensive recovery.
Global outlook improves, uncertainty remains
| Outlook | January 2026 | September 2025 |
|---|---|---|
| Weaker | 53% | 72% |
| Unchanged | 28% | 17% |
| Stronger | 19% | 11% |
Debt emerges as a central fault line
Global public debt hit $102 trillion in 2024 and is expected to approach 100% of global GDP by 2029, making debt management a critical policy issue. Risks are perceived to be significantly greater in emerging economies compared to advanced ones.
| Likely debt-related risks | Emerging economies | Advanced economies |
|---|---|---|
| Sovereign debt stress | 47% | 31% |
| Currency crisis | 41% | 19% |
| Banking stress | 24% | 14% |
| Corporate debt crisis | 21% | 20% |
| Household debt | 9% | 8% |
Opinions are evenly divided regarding the probability of sovereign debt crises occurring in advanced economies over the next year, whereas nearly half of the surveyed persons believe such risks are probable in emerging markets. A majority foresee governments resorting to higher inflation and increased taxes to tackle debt challenges, while 53% expect debt restructuring or default in emerging economies within the next five years, in contrast to only 6% for advanced economies.
Spending priorities narrow under fiscal pressure
The necessity to manage high debt levels is influencing government spending decisions. There is a near-universal expectation of increased defense spending, along with investments in digital infrastructure and energy, partially driven by AI-related energy demands. Conversely, economists predict a decrease in funding for environmental protection across both advanced and emerging economies, while spending on education, transport, and research is expected to either stagnate or face budget constraints.
Trade realigns amid strategic competition
Global trade volumes have remained robust, exceeding $35 trillion in 2025, reflecting a year-on-year growth of 7%. However, economists predict ongoing shifts in trade patterns. Tariffs between the US and China are likely to stay significantly above the levels seen before 2025, with competition shifting more towards technology controls and essential minerals.
A substantial majority anticipate an expansion of bilateral and regional trade agreements, as Chinese exports reorient from the US towards Asia, Europe, and other emerging markets. Simultaneously, foreign direct investment is expected to increasingly favor the US, while China’s outlook seems to weaken.
Growth prospects diverge by region
Regionally, South Asia stands out, with 66% of chief economists predicting strong or very strong growth, propelled by India. The outlook for the US has brightened, with most respondents expecting moderate growth, while Europe faces the weakest prospects, with over half forecasting sluggish growth.
In summary, World Economic Forum Managing Director Saadia Zahidi stated that the outlook highlights “surging AI investment, debt nearing critical thresholds, and the realignment of trade” as key trends shaping 2026.
These insights will play a significant role in the discussions at the upcoming World Economic Forum’s Annual Meeting in Davos later this month, as policymakers and business leaders consider how to navigate an increasingly fragmented yet stabilizing global economy.
