The global economic outlook has deteriorated sharply in recent weeks as conflict in the Middle East and disruptions near the Strait of Hormuz fuel concerns over a potential global economic shock, according to a new survey from the World Economic Forum.
Nearly 90 percent of chief economists surveyed expect global growth to weaken over the next 12 months, reversing cautious optimism seen at the start of the year, the WEF Chief Economists Outlook found.
The surveyed economists already rank the duration of disruptions near the Strait of Hormuz as significantly more disruptive than last year’s tariff turmoil. If the situation persists into the second half of the year, the impact could approach the severity of the COVID-19 crisis, compounding effects across global supply chains, energy costs and food prices, the report said.
An overwhelming 94 percent of surveyed economists expect global inflation to increase over the coming year.
The fallout is expected to hit the Middle East and North Africa region the hardest. After being viewed as one of the brighter economic regions only months ago, 88 percent of surveyed economists now expect weak or very weak growth in the region – the sharpest regional reversal in the survey.
Europe faces mounting stagflation risks as growth weakens and inflation concerns mount. Meanwhile, India and the United States are expected to remain relatively resilient, supported by domestic demand and investment, according to the report.
The World Economic Forum managing director Saadia Zahidi said the conflict in the Middle East had changed the economic outlook significantly. “The longer the disruption lasts, the heavier the long-term cost for those who can least afford it,” she said in a statement accompanying the report.