The global economic outlook is set to weaken significantly over the next year, largely due to ongoing geopolitical tensions and disruptions in the Strait of Hormuz. A recent World Economic Forum (WEF) survey of chief economists, conducted between April 6 and 17, found that 89% anticipate a slowdown in global growth, with 21% expecting a “significantly weaker” scenario.
Hormuz Disruption Fuels Inflation Fears
At the heart of global concern is the escalating conflict involving Iran, Israel, and the United States, which has severely impacted the Strait of Hormuz. This critical chokepoint, through which nearly 10% of global seaborne trade passes annually, has seen disruptions leading to supply shortages of crude oil, liquefied natural gas, and fertilizer-related goods. Brent crude prices temporarily surged past $125 per barrel in April, reflecting the market's anxiety.
Economists surveyed by the WEF believe that a prolonged shutdown of the Hormuz Strait could cause economic damage comparable to the COVID-19 pandemic's initial impact. Furthermore, 94% of economists expect global inflation to rise over the coming year, primarily driven by energy and food prices. The WEF specifically highlighted the risk of fertilizer shortages, with up to 30% of globally traded fertilizers typically transiting the strait, potentially escalating into a broader food crisis.
India Shines Amidst Global Turbulence
Despite the turbulent global landscape, India stands out as a strong performer in the WEF survey. It was identified as the geography with the strongest growth expectations among all regions. More than half of the surveyed economists anticipate strong or very strong growth in India over the next 12 months, supported by robust infrastructure spending, technology investments, and domestic manufacturing initiatives.
However, the report cautioned that India is not immune to external shocks, particularly imported inflation stemming from the Middle East conflict. The Reserve Bank of India reportedly deployed nearly $40 billion in forex reserves in March to stabilize the rupee amidst depreciation pressures. While India's economy is projected to grow 6.5% in 2026-27, inflation remains its most pressing concern, with 61% of economists expecting high or very high inflation.
AI Enthusiasm and Shifting Business Strategies
Artificial intelligence continues to be seen as a long-term growth driver, with over 90% of respondents expecting increased AI adoption, particularly in IT, digital communications, and financial services. However, economists are becoming more cautious about the pace of productivity gains, citing infrastructure bottlenecks, skills shortages, and regulatory hurdles.
The WEF survey also revealed that multinational companies are actively reassessing their global business strategies in response to heightened geopolitical risks. The United States was ranked as the most attractive business environment, followed closely by India and South-East Asia. India's appeal is attributed to its scale, growth potential, policy continuity, and increasing openness to trade and investment, while South-East Asia benefits from supply-chain diversification efforts.
The report concludes that geopolitical tensions, energy security, and supply-chain resilience will increasingly define global economic policy and corporate decision-making, potentially redefining globalization itself.