What will the global economy look like in 2030?

THE World Bank and International Monetary Fund (IMF) are hosting their Annual Meetings this week in Washington, DC, against a backdrop of international uncertainty. While official policy messaging often emphasises the resilience of the global economy, a tipping point could be on the horizon, not least given growing geopolitical headwinds.

World affairs have never been completely predictable. However, recent years have seen more “black swans”, which, as defined by Nassim Taleb, are developments beyond the realm of normal expectations that have a large magnitude and consequence, and play a vastly larger role than regular occurrences. 

This volatile, uncertain, complex and ambiguous landscape is full of potential business opportunities and risks, but is challenging for enterprises and other stakeholders in the Asia-Pacific and beyond to navigate.

World in 2030: scenarios

Looking ahead to 2030, there are at least four key scenarios founded on perhaps the two biggest macro uncertainties ahead.

First, whether the global economic expansion since the pandemic will endure, potentially driven by a continued artificial intelligence (AI) boom, or if this will falter, perhaps dramatically. Second, whether the geopolitical context will worsen or improve.

The four key scenarios are: “Resilient World”, which is a combination of continued economic growth and a very challenging geopolitical context; “Peace and Prosperity”, which sees an easing of geopolitical tensions with more robust economic growth; “World Stagnates”, which is a combination of a much weaker global economy and easing geopolitical tensions; and “Time of Troubles” which sees continuing, very high geopolitical tensions and global economic angst.

In reality, the world in 2030 may combine features of all these scenarios. Each presents major commercial opportunities and risks. While unlikely to materialise exactly as outlined, these plausible futures provide guiding posts to the complexity of the next half-decade.

However, two of the four scenarios are perhaps more likely than others. This is unfortunately because by 2030, the geopolitical context may well be at least as challenging, or possibly even more so, than it is today. While the post-pandemic 1920s became known as the prosperous Roaring Twenties, the post-pandemic 2020s may be seen by future historians as a more conflictual “Warring Twenties”.

The second global uncertainty is harder to forecast – whether the global economy will continue to grow, fuelled perhaps by the current AI boom.

Taken together, this means that the two most likely 2030 outcomes are the Resilient World and Time of Troubles scenarios. The most optimistic future, by contrast, Peace and Prosperity, may be the least likely to materialise.

Resilient World

The Resilient World paradigm is the one that tends to get much airtime from many policymakers. In April, for instance, IMF managing director Kristalina Georgieva said that “a better balanced, more resilient world economy is within reach. We must act to secure it... all countries must redouble efforts to put their own houses in order.” 

Last week, moreover, Georgieva emphasised again that the global economy is holding up better than expected, despite major shocks such as US President Donald Trump’s trade tariff policies. Only last Friday (Oct 10), Trump threatened 100 per cent tariffs on China’s US-bound exports, along with new export controls on “any and all critical software” from Nov 1.

While this scenario is more positive in its outlook than Time of Troubles’, global growth may still remain very uneven, led by emerging market powers such as India, in what has been a fragile period of post-pandemic expansion.

Although global gross domestic product growth in the 2020s has been the weakest since the 1960s, this has been masked to some degree by the AI boom. It is estimated, for instance, that US spending on AI now accounts for at least 40 per cent of GDP growth, which an increasing number of commentators indicate is leading to a growing bubble.

The period since the pandemic has also been seen as one of slowing globalisation. For instance, McKinsey estimates that Western investment into China is down by around 70 per cent since 2022.

Geopolitically, several regional wars may well continue, including in Ukraine, plus continued sabre-rattling from unstable nuclear regimes, including North Korea. However, world powers including the US and China still have significant incentives to prevent the spread of these conflicts into anything deeper, underpinning global resilience.

Time of Troubles

Yet, while the Resilient World paradigm is a focus in official policymaking circles, a new Time of Troubles cannot be dismissed. The latter term refers to a chaotic period of Russian history from around 1584 to 1613 defined by a challenging dynastic succession, which was characterised by much political instability, famine and foreign invasions following the death of Ivan the Terrible.

Fast forward to today, and a 2020s global Time of Troubles might be triggered by a combination of a worsening geopolitical context with a faltering global economic outlook. This might be precipitated by a significant tech economy crash, which might be much more harmful to the US than the 2007 to 2008 crisis that led to the collapse of Lehman Brothers.

Given the growing dependence of the US economy on AI investment, the nation’s vulnerability to such a crash may be acute. Indeed, some leading scholars, such as Massachusetts Institute of Technology professor and Nobel laureate Daron Acemoglu, perceive that it could lead to a wider unravelling of US power, intensified by the declining resilience of key US institutions under the second Trump presidency.  

Unlike the aftermath of other recent economic traumas of 2007 to 2008 and 2020 to 2021, one of the key challenges of a future crisis is that government indebtedness is forecast by the IMF to rise to an average of around 100 per cent of global GDP before the end of the 2020s. This means many countries may lack the fiscal firepower to fully counteract a big economic slump. 

This scenario would probably lead to a period of pronounced deglobalisation, and could see nations increasingly deploying “beggar thy neighbour” economic policies, including trade tariffs, akin to the years between the two world wars.

This future would see fragility morph into a cycle of decline – geopolitically and economically – in a landscape in which global order becomes precarious. Geopolitically, this might reduce the incentives for great powers, including the US and China, to prevent regional wars from growing – potentially threatening to sow the seeds for even larger conflicts.

The writer is an associate at LSE Ideas at the London School of Economics