Chief Economists Outlook January 2025

22Chief Economists Outlook The survey responses point to an increasingly complicated and strained global landscape over the next three years: a more bipolar system (79%), with a widening divide between the Global North and South (64%), declining levels of FDI (73%) and a shift towards regional cooperation (58%). The prospects for global collaboration are diminishing, especially for climate change (81%), while the proportion of respondents expecting the risk of conflict to increase is worryingly high (88%). Increasing global economic fragmentation poses a particular strategic challenge for multinational companies operating across geopolitical and geoeconomic fault lines. Only around one in 10 chief economists expect these companies to adopt a wait- and-see approach to increasing levels of fragmentation. By contrast, over three-quarters expect them to embark on potentially costly changes such as restructuring their supply chains (91%), regionalizing their operations (90%), focusing on activity in core markets (79%) or exiting high-risk markets (76%). There is already evidence of significant structural changes taking place. For example, in October 2024, a major global lender announced a restructuring of its operations into “eastern” and “western” groupings.46 Although the stated rationale of the move was to reduce costs and increase agility, it was widely perceived as being partly motivated by geopolitical de-risking.47 46 Aliaj, O. et al. (2024). 47 Davies, P . J. (2024).Share of respondents (%)9 12 9 2136 55 Regionalization of operationsRestructuring of supply chains Increased focus on risk management Increased focus on activity in core markets61 27 78 12 58 21 21 73 3 15 9 33 55Exiting high-risk markets No major changes: adopt a “wait-and-see” strategy 18Very unlikely Unlikely Neither likely nor unlikely Likely Very likelyFigure 13. Business response to fragmentation How do you expect multinational companies to respond over the next three years to global economic fragmentation? Source: Chief Economists Survey. (2024, November).