Despite mounting global economic uncertainty, chief economists worldwide remain most optimistic about South Asia’s growth prospects, with India positioned as the region’s principal driver in 2025 and 2026, according to the World Economic Forum’s latest Chief Economists Outlook. The report highlights India’s projected GDP growth of over 6% and underscores the region’s resilience even amid geopolitical tensions and inflationary pressures. However, the global economic landscape faces headwinds from rising protectionism, trade volatility, and the disruptive impact of artificial intelligence. While AI promises long-term growth, experts warn of short-term job losses and increased risk of societal instability due to its misuse.
South Asia Stands Tall in Global Growth Projections
Amid a turbulent international economic climate, South Asia has emerged as a rare bright spot, with one-third of chief economists surveyed by the World Economic Forum (WEF) expecting strong or very strong growth across the region. India, in particular, is expected to be the central growth engine, with the International Monetary Fund forecasting GDP expansion of 6.2% in 2025 and 6.3% in 2026.
This resilience comes despite an early May flare-up in tensions between India and Pakistan and persistent inflationary pressures across the region. Still, the combination of structural reforms, growing consumer demand, and strategic trade agreements—such as India’s recently concluded deal with the United Kingdom—offers reasons for cautious optimism.
Diverging Regional Outlooks: China Lags, U.S. Policy Sparks Concern
While South Asia gains momentum, the outlook for other regions remains mixed. Chief economists expressed divided opinions on China’s ability to meet its 5% growth target for the year, citing internal economic challenges and weakened external demand. In contrast, the Asia-Pacific region overall demonstrated signs of economic resilience.
In North America, however, economists expressed notable concern over the long-term effects of current U.S. policy. An overwhelming 87% warned that American economic strategy may delay business decisions and elevate recession risks. Europe, meanwhile, exhibited a cautiously optimistic tone as it navigates post-pandemic recovery and inflation control efforts.
Structural Shifts Reshape the Global Economic Order
The report emphasizes that current geopolitical and economic disruptions are not fleeting anomalies but indicative of a broader structural transformation. Nearly four in five respondents (79%) interpreted rising trade tensions, economic nationalism, and technological disruption as signs of long-term systemic change.
Public debt burdens are rising globally, with 86% of economists predicting increased government borrowing to accommodate higher defense spending. This trend risks diverting capital from essential infrastructure and social investments, further complicating growth trajectories in both advanced and emerging economies.
AI: The Great Catalyst—And a Double-Edged Sword
Artificial intelligence stands out as a key force expected to shape the next decade of global growth. Approximately 46% of chief economists anticipate AI to contribute a modest boost of 0–5 percentage points to global GDP, while 35% forecast gains in the 5–10 point range.
Despite its transformative potential, AI also introduces substantial economic and societal risks. Nearly half of the experts surveyed anticipate a net reduction in jobs due to automation and digital transformation. Meanwhile, 53% identified the weaponization of AI for disinformation and social destabilization as the top risk to economic stability.
Concerns over rising market concentration and disruption of traditional business models were also cited as major hazards linked to AI adoption.
Rising Uncertainty Forces Strategic Caution
The WEF report reveals that economic uncertainty is now at its highest point in years, with 82% of economists describing it as “exceptionally high.” Trade policy emerged as the primary area of concern, flagged by 97% of respondents, followed by monetary and fiscal policy uncertainties.
This heightened risk environment is already influencing business behavior: 87% of chief economists expect firms to defer long-term strategic decisions, further dampening investment and innovation. Governments, too, are likely to respond with increased borrowing rather than structural reforms, potentially exacerbating financial imbalances.
Policy Implications and the Road Ahead
As the world contends with overlapping crises—geopolitical instability, economic fragmentation, and technological disruption—the WEF urges policymakers and business leaders to act with foresight. According to Saadia Zahidi, Managing Director at the WEF, strategic coordination, agile governance, and targeted investment in transformative sectors such as AI are essential to mitigate risks and foster inclusive, sustainable growth.
India's emergence as a regional growth leader offers a potential model for resilience and opportunity. However, capitalizing on this momentum will require prudent fiscal management, investment in human capital, and careful navigation of global power dynamics.
The global economy may be entering an era of slower, more uncertain growth—but for South Asia, and India in particular, the next decade still holds promise.
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