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Global economic prospects shadowed by uncertainty, tight conditions, and AI advances-WEF

Chief Economists Express Concerns over Weak Growth, Geopolitical Rifts, and Varying AI Impacts

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In the latest Chief Economists Outlook unveiled today, global economic prospects remain subdued and riddled with uncertainty. The report underscores challenges stemming from tight financial conditions, geopolitical tensions, and the rapid evolution of generative artificial intelligence (AI). With over half of chief economists anticipating a global economic slowdown (56%), concerns about labor markets and financial conditions persist, emphasizing the need for global cooperation.

Managing Director of the World Economic Forum, Saadia Zahidi, remarked, “The precarious nature of the current economic environment is highlighted in the latest Chief Economists Outlook. Amid accelerating divergence, the resilience of the global economy will continue to be tested in the year ahead. While global inflation is easing, growth is stalling, financial conditions remain tight, global tensions are deepening, and inequalities are rising, underscoring the urgent need for global cooperation for sustainable, inclusive economic growth.”

Regional variations in economic outlooks reveal positive sentiments in South Asia, East Asia, and the Pacific, with a majority expecting at least moderate growth. China, however, stands as an exception, with concerns over weak consumption and industrial production impacting growth prospects. Europe’s outlook has weakened significantly, while the United States, the Middle East, and North Africa also face a less optimistic economic landscape. Latin America and the Caribbean, sub-Saharan Africa, and Central Asia see a moderate uptick in growth expectations.

Geopolitical rifts are poised to compound uncertainty as chief economists predict an acceleration of geoeconomic fragmentation. The majority anticipates geopolitics will fuel volatility in the global economy and stock markets, intensify localization, strengthen geoeconomic blocs, and widen the North-South divide in the next three years. With governments experimenting with industrial policies, there is consensus that these efforts will lack coordination between countries, potentially leading to rising fiscal strains and divergence between higher- and lower-income economies.

Generative AI takes the spotlight in the report, with chief economists expecting varying impacts across income groups. Optimistic views prevail about AI benefits in high-income economies, foreseeing increased efficiency in output production and innovation. Concerns arise about AI’s impact on employment, with expectations of a net-negative effect in low-income economies. The report, based on consultations and surveys with leading chief economists, calls for coordinated action by policymakers and business leaders in response to the compounding shocks to the global economy.

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