New Delhi, April 16
Middle-income economies are set to power the next phase of global expansion, even as the world economy confronts a new wave of structural challenges, according to a latest report by the World Economic Forum.
In its report, "Growth in the New Economy: Towards a Blueprint," the WEF outlines a shifting global landscape shaped by rapid artificial intelligence adoption, rising geopolitical tensions, mounting public and private debt, and increasing environmental and demographic pressures. These forces, it notes, are weakening traditional growth models and demanding new policy approaches.
Energy costs and political instability currently remain key constraints across regions. However, sectors such as IT services, advanced manufacturing, healthcare, and leisure are expected to emerge as major engines of growth in the years ahead.
The report identifies four core policy areas where governments and businesses must adopt strategic approaches while navigating complex trade-offs:
Technology, productivity and human capital: Sustained growth will depend on improving productivity and investing in human capital. Policymakers face choices between coordinated versus competition-driven innovation models, and between redistribution-focused and mobility-based inclusion strategies.
Global cooperation and domestic capacity: While leveraging comparative advantage and diversification remain key "no-regret" strategies, countries must balance global integration with strengthening domestic resilience, choosing between self-reliance and deeper international engagement.
Business environment and role of government: Reinforcing economic fundamentals such as institutional credibility, infrastructure, and macroeconomic stability remains essential. Governments must also navigate fiscal challenges, balancing prudence with alternative approaches to managing high debt levels.
Sustainability and economic policy: The transition to greener growth presents opportunities for long-term resilience but involves significant cost trade-offs. Policymakers must weigh investment-led approaches against cost-containment strategies.
WEF noted that middle-income economies are projected to contribute nearly two-thirds of global GDP growth by 2030, with Asia expected to account for over half of global growth. In contrast, low-income economies, despite faster growth rates, are expected to contribute only marginally.
In advanced economies, skill shortages and regulatory rigidities are major concerns, while in lower-income countries, access to finance and infrastructure gaps remain critical challenges.
Looking ahead, frontier technologies and the green energy transition are expected to drive investment, while rising debt, climate risks, and societal polarization could act as headwinds.
Demographic trends are also set to influence growth trajectories, with ageing populations slowing expansion in parts of Asia and Europe, while younger populations in regions such as the Middle East and Africa may support growth.
The report further notes that domestic corporate investment and foreign demand will be the primary drivers of growth over the next five years, as high public debt and weak income growth limit the role of public spending and consumption.
The findings are based on consultations with nearly 200 global leaders and a survey of over 11,000 executives across 118 countries conducted between 2024 and 2026.
The WEF said its ongoing Future of Growth Initiative will continue to explore emerging economic trends and pathways for sustainable and resilient growth.
- ANI
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