Faced with higher debt burdens amid an increasingly difficult global context and rising domestic pressures, some governments may need to make difficult choices in the next five years.29 Defence spending is almost unanimously expected to increase in advanced economies (97% expected increases, out of which 26% expect significant increases) and by a majority of respondents in emerging markets (74% expect increases, out of which 3% expect significant increases). Digital infrastructure and energy also appear poised to see further increases. Over three-quarters (77%) of respondents anticipate increases in spending on digital infrastructure in advanced economies, and more than seven in 10 (71%) expect this in emerging markets. Almost three in four (74%) expect higher spending on energy in advanced economies (43% in emerging markets). Expanding AI capabilities link both areas as surging power demand of data centres moves into the spotlight of the ongoing AI revolution.30 Record global military spending, surpassing $2.7 trillion in 2024, coupled with other economic needs, is increasingly crowding out other spending priorities.31 Beyond defence, digital infrastructure, energy and partially health, the majority of surveyed chief economists do not expect higher spending in any other sector over the next five years, including social security, research and innovation, education, environmental protection and transport. Demographic change is set to add significant pressure to national healthcare systems in the coming decades, with advanced economies facing this ahead of emerging markets.32 Close to half (44%) expect an increase in social security spending in advanced economies, and 53% anticipate higher spending on health in advanced economies. In emerging markets, 58% do not expect any changes in health spending, and 61% do not expect any change in social security spending. When it comes to research and innovation, a majority of 53% expect spending levels to remain unchanged in advanced economies (45% in emerging markets). Global innovation investments continued to grow in 2024, yet at the slowest rate since 2010 (2.9%).33 Education spending is expected to remain unchanged by majorities for both country groups (53% in advanced economies, 55% in emerging markets), though responses skew towards a potential decrease in advanced economies (38%) while they skew towards an increase (32%) in emerging markets. Despite increases in global spending on education, allocations per child have either decreased or stagnated.34 Nearly half of respondents (47%) for advanced economies and a majority of 58% for emerging markets do not expect changes to spending levels on transport, while about a third of respondents expect lower transport spending in both groups. In the context of outdated and ageing transport infrastructure, transport budget cuts could prove challenging.35 Government spending on environmental protection is expected to decrease. Large majorities expect spending on environmental protection to decline in both groups (59% in advanced economies, 61% in emerging markets). In the context of climate science projections, the decline in financing environmentally viable economic and energy transitions is a long-term risk.36 Chief Economists’ Outlook January 12

Chief Economists Outlook January 2026