Chief Economists Outlook January 2025

20Chief Economists Outlook 33 3 6 21 367 27 Share of respondents (%)Global economic shiftsGeopolitical rivalries Domestic policy choices Multilateral institutional decline61 36 61 12 12 630 15 39 18 45 30 Demographic changesVery unimportant Unimportant Neither important nor unimportant Important Very important Domestic policy choices were cited by almost all respondents (97%) as an important contributor to global economic fragmentation and by around one-third as very important. Whereas geopolitical rivalries may lead to a mix of intended and unintended fragmentation of the global economy, the role of domestic policy choices highlights the growing electoral constituency in many countries that supports a rolling back of at least some aspects of global integration. In particular, as noted above, immigration has become an increasingly central political issue in many countries. The challenges of fragmentation While these developments may have large distributional impacts, the chief economists see no clear economic gains in the aggregate. Framing the question in terms of economics perhaps misses the political gains that proponents of reduced global economic integration often hope to achieve, but it is nevertheless striking how little economic upside is expected overall. When asked whether fragmentation could lead to a reduction in systemic economic and financial risks – for example, by reducing the potential for cross-border contagion effects during a crisis – 88% of chief economists viewed this as unlikely or very unlikely over the next three years (see Figure 12). When asked whether there might be reduced within-country inequality – for example, because of greater policy autonomy or strengthened bargaining power for workers – 79% viewed it as unlikely or very unlikely. Although the results are more mixed, the chief economists are also unconvinced that fragmentation will lead to a surge in innovation as a by-product of technological competition between geopolitical rivals. Only 21% of respondents view this as likely or very likely, while 36% view it as unlikely or very unlikely.Figure 11. Drivers of fragmentation To what extent do you think the following factors are important contributors to current levels of global economic fragmentation? Source: Chief Economists Survey. (2024, November).