The tools that once drove growth – trade, borrowing, technology – are all under strain simultaneously, amid rising debt and an AI boom that has yet to lift ordinary wages. None of these issues can be solved in isolation; they require cross-sector, systems-level thinking and cooperation.
This is part of a series of Connecting the Dots articles, exploring how the defining challenges of our era are deeply and practically interconnected.
Operating a mid-sized manufacturing company in a developing economy looks very different today than it did just three years ago.
Consider a business that, not long ago, was comfortably profitable, exporting components into two markets and planning a gradual expansion. Fast forward to today, and one of those markets has effectively closed off as tariffs make sales uneconomical. The company is finding it hard to borrow as rates rise. And it’s tough to innovate out of the squeeze since the AI tools that might bolster productivity are largely designed – and priced – for economies with deeper capital markets and cheaper access to computers. Meanwhile, wages have barely moved in a decade, so workers are absorbing much of the shock.
That story is being repeated, in different forms, in almost every region of the world. The traditional engines of growth – trade, borrowing, technological diffusion – are all coming under strain at the same time, and they are doing so in ways that compound each other. That is the defining growth challenge of our era: not a single engine failing, but all of them under strain at once, each making the others harder to fix.
At the centre of this conundrum sits an architecture of trade, finance, technology and labour markets pulling in different directions.
Almost every decade has seen a slowdown of one kind or another. What is different at the moment is how many of the traditional levers are unavailable or aren’t working. While governments used to borrow their way out of a slump, many are already near the limits of what they can safely owe. Trade used to spread new technology and jobs to the countries that needed them most, but that channel is narrowing under geopolitical pressure. And in the past, technology could be relied upon to lift living standards, but now, gains are becoming more concentrated in a small number of firms and places.
Innovation, human capital and integration have long underpinned growth, even though integration has generated costs at the same time. What’s different now is that societal fragmentation and weak institutions are undermining the conditions for all three.
Growth, and the tools that drive it, remain the best path out of stagnation for billions of people. The International Monetary Fund (IMF) forecasts global growth will slow to 3.0% in 2026, hampered by risks from the war in the Middle East and trade fragmentation. While it is expected to recover to 3.4% in 2027, that is still below the 3.5% average growth recorded in 2024 and 2025.
IMF analysis shows that stronger institutions are essential for turning growth into shared prosperity, while also noting that recent technological advances have so far failed to deliver broad-based benefits.
Why isn’t the effect of AI adoption showing up in paychecks around the world?
Artificial intelligence is improving productivity, but its impact on pay remains limited and uneven. That reflects a longer trend: productivity growth across advanced economies has been weak since the mid‑2000s, despite sustained investment in digital technologies.
AI is beginning to change how work is done, with gains in specific tasks and sectors. But those gains tend to be concentrated in a small number of large firms and leading economies. Technology companies now account for a historically high share of equity market value, particularly in the US, and at the same time, median wage growth has been modest in many large economies and has also often lagged productivity.
The imbalance cuts both ways: some warn that the sheer scale of AI investment now underway, without matching gains yet visible in paychecks or output, carries the hallmarks of a bubble.
The gap is less about the technology itself than about diffusion. Firms and workers need the skills, organizational capacity and complementary investment to use AI effectively. Where those are missing, productivity gains are less likely to translate into higher wages.
Geopolitical fragmentation is slowing the cross-border flow of technology and knowledge, and climate-related disruptions are weighing on labour productivity in vulnerable regions.
The result is a widening gap between what AI could deliver across the economy and what it is currently delivering. It’s this gap that the Forum's Future of Growth initiative is built to address, convening governments, companies and labour representatives around the policy and investment choices that determine how productivity gains play out.
Why aren’t trade and investment reaching where they’re needed?
Trade and capital have historically been two of the most reliable ways new technology, jobs and opportunity have spread from richer economies to poorer ones. Both channels are narrowing at once.
Global trade growth is expected to slow to 1.9% this year, down from 4.6% in 2025, as tariffs, export controls and investment restrictions are politicized. Tariff measures between the world’s two largest economies are the clearest example, but the pattern extends well beyond any one relationship, reaching into areas such as advanced technology, digital infrastructure and cross-border investment.
That cuts both ways. While earlier decades of trade liberalization delivered gains, they also produced job losses in manufacturing regions of some advanced economies, a dynamic often referred to as the “China Shock”. Today’s tariffs and export controls are, in part, a political response to that.
Smaller and developing economies, often caught between competing blocs, are among the biggest losers. Disrupted supply chains destroy jobs in the places least equipped to absorb the shocks, and fragmented trade routes make it harder for clean energy technology and climate finance to reach the countries that need them most.
The same economies losing out on trade are also the hardest to finance. The clean energy, infrastructure and digital transitions the world needs require trillions of dollars – global climate finance surpassed $2 trillion for the first time in 2024, but needs to rise to at least $6.2 trillion annually by 2035. The money is not arriving fast enough, or in the right places. This is because developing economies are often seen as too risky for investors, a pattern that shows up at climate talks where pledges go unmet, in digital infrastructure left unbuilt, and in education and health systems that stay underfunded. In unstable geopolitical conditions, capital tends to stay put, widening the gap between where investment is needed and where it lands.
Trade and investment are, in this sense, the same underlying problem viewed from two angles: capital and goods both struggle to reach the places geopolitical uncertainty has made appear riskier than they actually are. The Forum's Navigating Global Financial System Fragmentation initiative works on exactly that mismatch, estimating that fragmentation of this kind could cost the economy up to $5.7 trillion.
Why is debt crowding out growth?
The current global debt burden is primarily public, and the International Monetary Fund warns that it is set to remain high or rise further in the years ahead.
Many governments borrowed heavily to get through the pandemic, the energy crisis and rising defence spending. Debt in advanced economies is still above 100% of GDP, and in a Forum survey, 74% of economists expect greater volatility in public debt markets over the next 12 months.
For many poorer countries, the consequences are immediate. In sub-Saharan Africa, debt servicing is now crowding out health and education spending in many countries, so every dollar paid to creditors is one less dollar available for schools, hospitals or skilling.
High debt also leaves countries more vulnerable when the next shock hits. Climate disasters can push already stretched budgets even further into crisis, while heavily indebted governments have less leverage when negotiating with lenders or trading partners – leaving them with less fiscal space to keep investing in the foundations of growth even as the pressure to do so intensifies.
Why does inequality keep getting worse?
The final piece is inequality. Wealth has been concentrating at the top faster than incomes have grown in the middle or at the bottom. This suppresses the everyday consumer demand that broad-based prosperity depends on. It also erodes the sense that the economic system is working for ordinary people – a feeling that can fuel nationalist politics, making international cooperation harder and the geopolitical fragmentation described above yet more entrenched.
Digital exclusion maps closely onto economic exclusion, as we explore in the Technology article in this series. And the communities most exposed to climate change are disproportionately those with the least wealth to absorb the shock, meaning the costs of a warming planet compound the inequality already built into the system.
Is the world finally connecting the dots?
These five pressures – stalled productivity, unsustainable debt, fragmenting trade, a persistent investment gap and deepening inequality – are the hallmarks of a financial system under pressure.
A government paying down debt cannot invest in the skills and infrastructure that raise productivity. A country cut off from global trade cannot attract the capital that closes its investment gap. Rising inequality fuels the political fragmentation that makes trade and investment harder to sustain.
Rebuilding requires the same principle underpinning this year's Annual Meeting: public-private cooperation to support new growth models, with governments willing to coordinate on debt and trade, companies willing to invest where returns are real but perceived risk is high, and civil society willing to hold both accountable. The problem is well understood; the challenge is coordinating action before more of the traditional engines of growth falter, or before the current situation worsens.
And that brings us back to the mid-sized manufacturer we began with. Stalled demand, expensive credit, limited access to AI tools and weak wage growth are not separate problems – they are symptoms of a system under strain. If the global links between debt, trade, technology and inequality can be repaired, businesses like this will have a better chance to invest, hire and grow.
No single institution, sector or country can solve these challenges alone – because they do not exist alone. The economic, technological, social and planetary forces shaping our future are deeply interconnected, and so too must be the responses. At the World Economic Forum, we bring together the leaders, ideas and partnerships needed to turn shared understanding into collective action. Because moving the world forward starts with seeing the whole picture.
