The Global Risks Report 2026

Insight Report: Key Findings (6)

​Global Risks In-Depth: An Economic Reckoning
The International Monetary Fund (IMF) projects 3.1% global gross domestic product (GDP) growth in 2026, below the 2000-2019 average of 3.7%, but still well above recessionary levels. However, it notes that risks are tilted to the downside. Apart from fiscal issues, key areas of concern are the impacts of policy uncertainty (especially related to protectionism), labour-supply shocks, possible financial market corrections and the weakening of key institutions, including central banks. 
 
The next two years are likely to see the continuing convergence of a set of economic and financial challenges, in some cases building for decades and that seem to be accelerating. In the Global Risks Perception Survey 2025-2026 (GRPS), economic risks overall have experienced significantly sharper increases in two-year rankings than all the other risk categories – geopolitical, environmental, societal, and technological. Economic downturn (#11) and Inflation (#21) have each increased eight positions from last year and Asset bubble burst (#18) seven positions. Geoeconomic confrontation also rose by eight positions, while no other risk among the full set of 33 risks increased by more than four positions. 
 
This section examines three relatively near-term risks that could lead to an economic reckoning. 
 
First, consistently mounting debt levels may become a greater drag on growth or potentially lead to unexpected shocks. Second, predictions of an asset bubble bursting may come to pass, with far- reaching consequences. Third, there is an increased risk of boomerang inflation as trade barriers grow and as central banks come under pressure. 
 
Debt faultlines 
Total global debt (government plus private sector) stood at $251 trillion or 235% of GDP in 2024, and debt levels are steadily rising in both advanced economies and in emerging market and developing economies. Many governments are struggling to find ways to rein in their fiscal deficits in an era in which interest rates globally have risen from multi-decade lows in 2022 and spending pressures have increased. With debt- servicing costs having become significantly higher, governments are having to make increasingly painful concessions on key areas of expenditure, or consider new approaches to taxation. 
 
Several leading economies are continuing to run loose fiscal policy: the United States is pursuing a historic spending programme that is projected to raise the fiscal deficit from 5.6% of GDP in 2025 to 5.9% in 2026 and 6.0% in 2027. This will contribute to federal debt held by the public rising steadily from 100% of GDP today ($30 trillion) to 120% in 2035 ($53 trillion), exceeding the previous high of 106% set in 1946. Meanwhile, Germany in March 2025 amended its constitution to allow a major fiscal expansion focused on infrastructure and defence, outside of its debt brake rule. Pressure to expand fiscal outlays on these and other strategically critical sectors are likely to be a continuing theme across many OECD economies over the coming years, driven by risks related to state-based armed conflict and a growing sense that domestic industrial and military capacities may require substantive rebuilding in a more fragmented world. 
 
Debt (#16) has decreased one position in this year’s GRPS. However, debt across the public, corporate and household sectors is one of the most significant concerns for business leaders at the country level, according to the Executive Opinion Survey 2025 (EOS). Executives in 21 economies place this risk within their top three national threats. The concern is particularly acute in lower- middle-income and low-income economies, where vulnerabilities to tightening financial conditions are more pronounced. 
 
Over the next two years there is a high volume of debt that needs refinancing globally. Nearly 45% of OECD countries’ sovereign debt is maturing from 2025–2027, in part due to large new issuance during the pandemic in 2020–2021. On top of this significant sovereign debt refinancing need, large fiscal deficits will require substantial additional debt issuance. 
 
Meanwhile, about one-third of global corporate debt, a rising proportion of which is used for making interest payments on existing debt rather than being used for productive investment, will also need refinancing over 2025–2027. Added to these needs, the volume of debt likely to be issued by companies building out AI infrastructure could be huge; according to one estimate, it could reach $1.5 trillion in investment grade bonds alone over the next five years.
 
While it is possible that markets digest the upcoming high volumes of public and corporate debt issuance smoothly, there are risks of heightened bond market volatility in some countries, similar to what happened in the United Kingdom in 2022, when a proposed shift in fiscal policy, alongside a technicality related to pension fund liabilities, contributed to a sell-off in the gilt market.58 Spikes in bond prices globally could, in turn, uncover further risks in less-regulated areas of credit markets that have taken on greater importance in recent years. Concerns about non- bank financial institutions – financial intermediaries operating outside of banking regulations – and especially private credit are steadily mounting following bankruptcies in relatively peripheral areas of the market in the second half of 2025,with the Financial Stability Board noting in November 2025 that the sector warrants close monitoring. Private credit is increasingly attracting retail investors, despite potential liquidity risks in the event of a crisis.
 
Many governments and companies have a range of tools at their disposal to push debt problems further into the future, well beyond the two-year time horizon.However, as governments potentially spend more on debt servicing in an environment of already strong fiscal pressures, less support will be available for driving economic growth. According to the EOS, countries where debt is ranked high as a major risk are also those where recession or stagnation fears are elevated. 
 
Government responses to increasingly unsustainable fiscal outlooks will differ across countries but are likely to focus on attempting to generate strong economic growth and lower real interest rates, while directing spending to strategic sectors. Some governments may be forced by bond-market volatility to retrench towards more fiscal austerity, which would lead to severe short- to-medium-term negative impacts on household wealth. An Economic downturn would, according to the GRPS, have a range of consequences that are inherently societal in nature, including Inequality and Decline in health and well-being risks. 
 
Bubble economy? 
There is currently widespread concern around elevated equity prices for the largest technology companies, and 2025 saw periods of frenzied investor interest not only in artificial intelligence (AI)- related stocks, but also in sectors such as nuclear, quantum or rare earths. A sharp run-up in the prices of precious metals has raised concerns of bubble-like activity there, too. Some of these prices have since stabilized or corrected, but concerns about overvalued markets remain. 
 
Should the predictions of an asset bubble burst turn out to be true, the potential impacts can be significant. Global institutional and retail investors are heavily invested in US stock markets by historical standards, so the resulting potential impacts of a crash could be severe for the global economy; 85% of global chief economists in September 2025 believe a financial shock would have wide-ranging systemic effects. If there were a downturn in US stock markets comparable to the 2000 dotcom bubble burst, the value of wealth destruction could be far greater given how high exposure is today, and the ensuing impacts on consumer demand could be crushing.
 
The valuations of the largest US stocks are sustained in part by global passive inflows, including from pension funds that mechanically contribute savings towards retirement plans, often via index funds. The largest stocks in the index receive ever larger inflows, fuelling market concentration. This dynamic has been building for two decades. If passive flows were finally to change direction, a self-reinforcing reverse dynamic could ensue. 
 
This could happen, for example, when more members of the baby-boomer generation retire or if there is a sharp upturn in unemployment if many jobs are displaced by technology, leading to a reduction in contributions to retirement funds and/or to emergency withdrawals. 
 
In an alternative scenario, investor sentiment could turn against leading AI companies, if doubts take hold over whether the huge investments in AI capital expenditure (capex) will pay off. Total spending on AI worldwide is estimated at $1.5 trillion in 2025 and is projected to rise to $2 trillion in 2026, with the main segments being generative AI (genAI) smartphones, AI-optimized servers, AI services, AI application software, AI processing semiconductors and AI infrastructure software. The data centre capex of the top eight US hyperscalers (very large cloud services providers) alone amounted to $258 billion in 2024 and is projected to more than double to $525 billion in 2032.
 
However, current and future revenues linked to these AI capex investments are difficult to estimate; there may ultimately be many losers alongside a few winners. Some companies will be undercut by providers of similar services at cheaper prices, while others may find that some key technological inputs, notably graphics processing units (GPUs), become quickly outdated. The vulnerability of the companies that are investing heavily today will depend not
only on the revenues that materialize, but also on how they have financed their outlays. The largest hyperscalers have until recently drawn heavily on their own cash. But increasingly the AI buildout is also being financed via relatively opaque special- purpose vehicles and/or with debt.
 
It is possible that the strategic decisions made by today’s leading technology companies will pay off, particularly with support from governments, given AI’s strategic geopolitical value and the vast opportunities across sectors. However, if investor concerns about funding mechanisms and debt levels start to outweigh excitement about uncertain future revenues, that could trigger an asset bubble burst. Other possible triggers to watch for include a societal backlash against the AI buildout; for example, if concerns emerge around data centre water usage,unemployment, or, more broadly, inequality. Longer term, quantum technologies could potentially upend entire data centre-based business models. 
 
Boomerang inflation 
According to the IMF, inflation is projected to fall to 4.2% globally in 2025 and to 3.7% in 2026, albeit with above-target inflation in the United States and subdued inflation in most other countries. In the immediate term, inflation is thus expected to remain largely under control, although the figure masks an acute cost-of-living crisis in many countries following the significant global inflation spike in 2021–2022. 
 
There are several risks that could worsen the inflation outlook. Rising prices of natural resources if geoeconomic confrontation intensifies are of concern. Further, the inflationary pressures associated with higher tariffs should not be underestimated. Sustained, broad tariffs could lead to widespread inflationary pressures, particularly for the United States and closely linked economies including Canada and Mexico. Uncertainty is the defining feature of the outlook; specific policy design and the level of sector-specific targeting of tariffs are critical in determining inflationary impacts. 
 
Another source of inflation risk may emerge from disruptive paradigm changes in monetary policy. As governments seek ways to stimulate growth and manage growing debt servicing burdens, some may also increase pressure on central banks to run more accommodative monetary policies. Central- bank independence could be further eroded in this scenario. With political and national security considerations dominating economic policy-making, central banks could see their role shifting away from a narrow focus on inflation targeting (and in some cases ensuring labour-market stability) and towards prioritizing government financing. 
 
This would be associated with significant risks, as central-bank independence is correlated with better economic outcomes, including significantly reducing inflation in the long run. In one scenario, tensions between governments and central bankers would mount. In another, should central banks capitulate, the current generation of financial market participants - having grown accustomed to a world with independent central banks, particularly in advanced economies - would have to recalibrate their thinking around monetary policy, shaking confidence and economic fundamentals. Such fundamental change is likely to be associated with bouts of financial volatility as market participants price in the changing policy outlook. Over time, likely pursuit of debt monetization by more politically beholden central banks would heighten the risk of sustained inflation, eroding real incomes and leading to deeper inequality and societal polarization. 
 
Actions for today 
To boost long-term economic growth, governments will need to exercise fiscal prudence and prioritize more efficient spending, as well as enact structural reforms to boost productivity and growth. At the same time, taxation adjustments to generate revenues have already been implemented across many countries. More such measures are likely to be needed in the coming years to help address high debt levels and emerging expenditure needs, including for security and defence, healthcare and social benefits, and climate change-related spending.
 
For low-income countries facing liquidity challenges related to heavy debt burdens, more and better concessional finance, as well as other innovative financial instruments supported by multilateral institutions will remain critically important. The GRPS finds that Debt is the leading risk that can be addressed by Financial instruments.
 
One such mechanism is Debt-for-Development Swaps, financial instruments that allow debt- encumbered nations to convert sovereign debt into structured investments in critical economic sectors. The Global Hub on Debt for Development Swaps was launched at the Fourth International Conference on Financing for Development in 2025, with the aim of enhancing access to debt swaps and improving their design and execution.
 
Governments can also take measures to make their banking systems more attractive and by extension more resilient in the face of potential future global debt or broader financial crises. These include measures to decrease the proportion of citizens who are unbanked or enabling faster and more efficient payments. India’s Unified Payments Interface provides a good example. Access can also be improved by upgrading payment infrastructure, as in the case of Mexico’s Electronic Interbank Payments System.
 
World Economic Forum, Geneva, Switzerland.