WEF 2025: Fragmentation will hit multinationals, say economists

More than three-quarters of chief economists polled by the World Economic Forum (WEF) expect multinational companies to embark on potentially costly changes as a result of increasing global economic fragmentation.

Four days ahead of WEF’s annual meeting in Davos, the organisation’s Chief Economists Outlook compiled the views of chief economists to draw a picture of increasing global economic dislocation.

91% of economists polled expect multinationals to restructure their supply chains, and 90% expect firms to regionalise their operations as a result of fragmentation. 79% expect them to focus on activity in core markets and 76% expect exits from high-risk markets. 

“The latest Chief Economists Outlook reveals a global economy under considerable strain,” said Aengus Collins, head of economic growth and transformation at WEF.

The report highlighted the intensifying trade tensions expected in the coming years between major powers and more broadly. Factors that will contribute to such tensions and fragmentation include protectionism, conflict, sanctions and national security concerns, the report predicts. 

“Recent events, particularly in Ukraine and across the Middle East, suggest that the trend of widening and intensifying geopolitical instability may still have some way to go,” explained the report. 

Over the next three years, global fragmentation will lead to a widening divide between the Global North and South, believe 64% of respondents, while 79% expect the emergence of “a more bipolar global system.” 

Meanwhile, the prospects for global collaboration on climate change are darkening, according to 81% of respondents. 

What will this fragmentation mean? 

At a global scale, some 82% of respondents predict greater regionalisation of trade over the next three years, alongside a continuing gradual shift from goods to services. 

“The clearest expectation of the chief economists surveyed is that global fragmentation will lead to higher prices, with unanimous agreement that it is likely or very likely that costs for consumers and businesses will increase over the next three years. One potential channel for such inflationary pressure is the disruption of global value chains – for example, through companies’ increasing use of reshoring and friend-shoring.” 

For Africa, further regionalisation could lead to a strengthening of intra-continental trade networks, potentially making African economies more interdependent and competitive globally. 

At the same time, this regionalisation could further reinforce inequalities in technology and skills across countries and could contribute to a slower service-sector shift.

Moderate growth expectations for Africa 

Based on the survey, the majority of respondents reported that they had moderate expectations for economic growth in 2025 for both Sub-Saharan Africa (52%) and the Middle East and North Africa (64%). 

Expectations for inflation were also high with 80% of respondents expecting moderate or even higher inflation for Sub-Saharan Africa and the Middle East and North Africa regions in 2025.

Collaboration between African countries will be essential for sustainable growth in a strained global political landscape. The findings indicate that advanced economies tend to benefit more than developing economies from services trade, but a majority of the chief economists point to the increasing importance of services as a driver of economic development.

“Deepening fragmentation in high-technology sectors threatens to have an outsized economic impact, given that in most countries, these sectors tend to be high growth and highly trade-intensive,” said the report.