Chief Economists Outlook January 2025

21Chief Economists Outlook Share of respondents (%)3 59 …a weakening of collective action on climate change?…increased use of interventionist industrial policy? …increased costs for consumers and businesses? …increased risk of conflict?38 76 24 9 9 39 42 12 1264 24 3 18 61 18 27 70 70 67 21213 3 3 358 33 6 6648 42 6 18 42 27 9 955 27 3 3…a widening divide between the Global North and South?…a more bipolar global system? …declining levels of foreign direct investment? …more fragmented financial markets? …a strengthening of regional cooperation? …an acceleration of global innovation? …reduced inequality within countries? …a reduction in systemic economic and financial risks?Very unlikely Unlikely Neither likely nor unlikely Likely Very likely The clearest expectation of the chief economists surveyed is that global fragmentation will lead to higher prices, with unanimous agreement that it is likely or very likely that costs for consumers and businesses will increase over the next three years. One potential channel for such inflationary pressure is the disruption of global value chains – for example, through companies’ increasing use of reshoring and friend-shoring.43 A 2024 survey of US chief executive officers (CEOs) and chief operating officers (COOs) showed that the proportion of companies with plans to shorten their supply chains had jumped to 81% from 63% in 2022,44 while in 2023, an annual index of reshoring in the US registered its largest increase on record.45 Moreover, in the US and elsewhere, the process of reshoring is being bolstered by governments’ adoption of interventionist industrial policies, a trend that almost all (97%) chief economists expect to accelerate as a result of global fragmentation. Figure 12. Impacts of fragmentation In light of current trends, how likely is it that over the next three years global fragmentation will lead to… Source: Chief Economists Survey. (2024, November). 43 Nagel, J. (2024). 44 Bain & Company. (2024). 45 Kearney. (2024).