2025 could be another bumpy year for the global economy with the majority of chief economists surveyed in a World Economic Forum survey expecting conditions to weaken. CNBC Africa is joined by Aengus Collins, Head, Economic Growth, Revival and Transformation, World Economic Forum for more.
It looks like 2025 could be another bumpy ride for the global economy with the majority of chief economists surveyed in a World Economic Forum survey citing expectations of continued weakness. Joining us to drill in further into this discussion, I'm joined by Aengus Collins, the Head, Economic Growth, Revival and Transformation at the World Economic Forum, at WEF essentially. Aengus, thanks so much for your time. So in the particular report, you actually say that the latest chief economist outlook reveals a global economy under considerable strain. Although when we dig deeper, we do see that strain is not evenly shared amongst the geographies in the world because we are seeing optimism in certain areas and like the US and we are seeing weakness in others like Europe as well as in China. Maybe just give us a broad view of some of the primary pressure points that you say and your chief economists say continue to weigh on the global ecosystem. Okay, absolutely. As you say, overall, the outlook is quite gloomy. That's been the case for a number of years now. This time, 56% of our chief economists are looking at a weakening of the global economy in the year ahead compared to just 17% who think it will strengthen. I think if I had to take three things out of the latest edition of the chief economist outlook, I think one would be that overall weak perspective. Second, I think for obvious reasons, all eyes being on the US and just I think a lot of anticipation and uncertainty around what's going to happen in the US in the months and years ahead and how policy changes there may spill over into the rest of the world. I think a third thing and again, this is a recurring theme for the chief economists is just intensifying fragmentation pressures in the global economy. If we take even a further step back, I think one thing underlying each of those three elements is a changing relationship between politics and economics of both domestic politics and geopolitics. I think we've seen, I think, in many areas and for the world writ large, I think the world moving through quite a difficult phase at the moment in terms of that relationship and vicious circle dynamics between politics and economics. I feel like I'm sounding like a broken record now because every other question that I ask every new guest is that is based on US President Donald Trump, but then every other interview that I listen to as well also features Trump when we're talking about outlook for the global economy. I suppose my question then is what does that all mean for the continent and its prospects in the near term? The honest answer is it's very difficult to tell. I think two things come out quite clearly from our latest survey of the chief economists. On the one hand, there is a very clear expectation of significant changes in almost all areas of US policy. I think monetary policy is probably the one major exception there, but there's also, I think, significant uncertainty as to precisely what will happen in each policy area. Trade is a really good example. I think by far the most unanimous result in terms of what the chief economists expect is an uptick in protectionism, a shift to or an intensification of trade war dynamics, particularly between the US and China. Also more broadly, however, but very significant uncertainty as to exactly what level or shape any tariffs or other measures that will come in will actually take. So it's just very difficult to tell at the moment. I think we've been used to volatility in recent years. I think we've had a number of very significant shocks. I think that volatility and uncertainty is going to continue to weigh on the outlook. There was a report that the incoming US president was looking to apply a gradual approach to the adoption of certain tariffs and protectionism measures. And I just wonder whether that will make a difference as opposed to a slap bang approach of putting them in place right now. Will it make a difference in your view to how you are looking at the global picture, particularly as it does pertain to inflation? Because there are a lot of worries about his position on trade, his position on immigration, his position even on tax cuts in the US and the inflationary impact it could have in the global ecosystem and the changing of the narrative that it could have in terms of the inflation fight right now being far from over. I think that's true. I think if to the point about the level of changes coming in on tariffs in particular, one very clear result that came out from the chief economist was their expectation that yes, there will be very clear changes to US trade policy, but they're unlikely to be of the sort of magnitude that was being talked about during the presidential campaign. So again, that's where some of the uncertainty comes in. Clearly something is going to happen, but the expectation is it will be tempered or moderated relative to some of the numbers that had been discussed before. Nevertheless, your point about the inflationary pressures is absolutely the case. That is another recurring strand in the responses of the chief economists. I think there's two separate things pushing in this direction. One, the policy agenda that looks like it will be pursued in the United States, but also related to it, but also a distinct pattern of fragmentation. So a greater level of fragmentation in multiple areas of the global economy. And one of the clear expectations of the chief economists is that that fragmentation will also lead to upward pressure on prices for consumers and businesses. I think I've lost count of the number of times that you've mentioned the word fragmentation, not accusing you of repetition, but acknowledging that it is a major risk right now. And perhaps let's just double click on that. You're talking about rising fragmentation, you're talking about regionalization, you're talking about the reshaping of supply chain, you're talking about increased debt that are coming across as worries by some of the top economists in the world. Angus, what then should be the response from governments to some of these growing risks, and especially in this environment where the World Economic Forum is advocating for a stronger collaboration to overcome some of the world's most oppressing challenges now, from climate change to some of the threats, even though there are opportunities that increase technological innovation and all that will bring? So I think that point about collaboration is crucial, and I think there's no doubt that collaboration on many issues is becoming more difficult. I still think it's imperative that we find ways of collaborating, that we make sure that we differentiate between those areas where collaboration has become more difficult and other areas where collaboration is still ongoing. But I think it's also important, I have stressed fragmentation quite a lot, I think fragmentation does bring risks, it does bring costs. It's important to note that while I think there's a clear sense that the policy moment that we're in right now has particular significance, and 60% of the chief economists see the current moment as marking a durable shift rather than just a period of short-term disruption in the global economy, it's also the case that these dynamics have been playing out for some time, and there is a strong degree of resilience in the global economy. So on the one hand we've been talking about how trade is becoming more difficult, increasing barriers, trade war dynamics, it's also the case that half of the chief economists still expect global trade volumes to increase. There is resilience among economic actors, and taking the trade example again, I think part of what we'll see may be some more re-routing of trade rather than an actual fall-off in the level of transfers of goods, services etc. I did note that point as well, that there is a general expectation that trade volumes will increase notwithstanding the difficulty of the environment that companies would have to navigate as the process unfolds. But Angus, thanks so much for your time. I was just wrapping up the conversation, but thanks so much for sharing your insights, and I'm sure there'll be many more that will be shared next week from Davos at the World Economic Forum meetings, but that was Angus Collins, the Head of Economic Growth Revival as well as Transformation Over at WIFF.
Theme: Global Economic Strain and Fragmentation Risks in the World Economic Forum’s 2025 Outlook
The global economic outlook for 2025 continues to paint a gloomy picture, with the majority of chief economists surveyed in a recent World Economic Forum report expecting a weakening global economy. Aengus Collins, Head of Economic Growth, Revival, and Transformation at the World Economic Forum, discussed the key pressure points and risks that are currently shaping the global ecosystem. According to Collins, the latest chief economist outlook highlights three primary pressure points that are contributing to the challenging economic landscape. Firstly, there is an overall weak perspective with 56% of chief economists anticipating a global economic slowdown in the year ahead. Secondly, amidst the uncertainty, all eyes are on the United States as changes in US policy could have significant global implications. And thirdly, there is a concern about intensifying fragmentation pressures in the global economy, driven by the changing relationship between politics and economics. One significant factor influencing the global economic landscape is the role of US President Donald Trump. The uncertain policy changes expected in the US, particularly in the areas of trade and protectionism, are causing anxiety among chief economists. The looming threat of trade wars, especially between the US and China, is a major concern, leading to increased volatility and uncertainty in the global markets. In terms of potential inflationary impacts, Collins highlighted that while changes to US trade policy are anticipated, they may not be as extreme as initially speculated. However, the growing fragmentation in the global economy, coupled with trade tensions, could lead to upward pressure on consumer and business prices. Collins emphasized the need for stronger collaboration among governments to address the growing risks and challenges facing the global economy. While fragmentation poses significant risks and costs, he also noted the resilience present within the global economy. Despite the obstacles, half of the chief economists still expect global trade volumes to increase, indicating a level of adaptability and flexibility among economic actors. In conclusion, while the economic outlook for 2025 appears bleak, there is room for cautious optimism and a call for enhanced collaboration to navigate the challenging economic environment. The World Economic Forum continues to advocate for a united approach to overcome global challenges, from climate change to technological innovation, amidst the evolving dynamics of the global economy.
"Collaboration on many issues is becoming more difficult, but it's imperative that we find ways of collaborating, that we make sure that we differentiate between those areas where collaboration has become more difficult and other areas where collaboration is still ongoing."
['World Economic Forum', 'Global Economy', '2025 Outlook', 'Chief Economists', 'US Policy', 'Trade Wars', 'Inflation', 'Fragmentation', 'Collaboration', 'Global Challenges']