Executive summary

What is the global growth outlook? Defined less by a single shock than by a series of compounding challenges, the global economy is entering a period of slower growth amid persistent uncertainty. Over the next three years, global output is expected to average 2.9 percent—below the pre-pandemic average of 3.2 percent. Geopolitical risk (exemplified by the recent expansion of conflict in the Middle East), policy uncertainty, and rising debt burdens continue to weigh on growth. At the same time, a surge in artificial intelligence investment and supportive fiscal policy in key economies are providing some tailwinds to growth. The United States and China are projected to post average growth of 2.5 percent and 4.4 percent, respectively, through 2028.

What is constraining growth? Will it persist? Some pressures remain cyclical. Wage growth in advanced economies is proving more resilient than expected, complicating the path to monetary easing, while inflation dynamics remain uneven. More importantly, a growing set of constraints is structural. Geopolitical risk has shifted from an episodic shock to a standing feature of the global economy, reshaping trade and investment decisions. Climate change, demographic aging, and AI-driven labor market disruption are adding to these longer-term headwinds, limiting potential growth and increasing volatility.

How is the K-shaped economy reshaping outcomes across regions, sectors, and households? Economic averages increasingly obscure widening divergence. The global economy is becoming more distinctly K-shaped, with sharply different outcomes across regions, industries, and income groups. Asia and Australasia is expected to remain the fastest-growing region, averaging 3.9 percent growth through 2028, led by India’s strong domestic demand and services exports. Europe and Eurasia, by contrast, face weak growth prospects of just 1.5 percent, reflecting productivity challenges, high debt, and geopolitical exposure. Similar divergence is evident within economies, where technology-enabled sectors and higher-income households continue to pull ahead while others face greater cost pressures.

How are governments responding to heightened volatility and fragmentation? Governments are playing a more active role in shaping economic outcomes under the banner of economic security. Industrial policy, tariffs, export controls, and investment screening have become central tools of economic statecraft. While these measures have supported strategic industries, they have also increased policy risk, weakened multilateral norms, and raised the cost of doing business across borders. Expansionary fiscal policy is also pushing public debt to historic levels, constraining governments’ ability to respond to future shocks.

How are firms adapting and what does this mean for business leaders? Despite a more fragmented and interventionist environment, the private sector has shown resilience. Firms are redesigning supply chains, adjusting pricing strategies, and embedding geopolitical and policy risk into strategic planning, often pursuing “polyalignment” to preserve market access while hedging exposure. Looking ahead, there is no longer a single “average” economic trajectory to plan against. Success will favor organizations that treat uncertainty as structural, design for divergence, and align investment with long-term shifts in technology, demographics, and climate, turning resilience into a source of competitive advantage.

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