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Global Economy at a Crossroads:
New Alliances, Rising Debt, and the AI Boom

Written by Rajul Grover

Global Economy at a Crossroads: New Alliances, Rising Debt, and the AI Boom

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The global economy is shifting in ways that might shape the next ten years. From rising trade blocs to growing debt and the advent of artificial intelligence, the shifts taking place today are impacting how countries grow, compete, and cooperate.

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A New Economic Bloc on the Rise

At the Shanghai Cooperation Organisation summit in Tianjin, Chinese, Russian, and Indian leaders deliberated on their plans to create a new world with fewer dollars. Their proposals included a development bank, artificial intelligence research facilities, and new financial institutions for Global South states.

It is a straightforward idea: offer emerging economies more options than Western banks and currencies. If it succeeds, it could reshape global trade by shifting power to Asia and other emerging markets.

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Globalisation: Not Ending, but Changing

Globalisation is alleged to be in decline, yet the majority of economists assure us that it's actually evolving. Trade in mundane goods like food and clothing continues unabated, but for essential sectors—like semiconductors, energy, and artificial intelligence—countries are aligning along security interests.

This would result in us having two leading economic "clusters" soon: one led by China and its associates, and the other associated with Europe, Japan, and other associates. The transition would reduce efficiency but could also render the world economy less vulnerable to overdependence on one region.

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Rising Borrowing Costs for Governments

There's another big tale in bond markets. Long-term government borrowing costs, or bond yields, are climbing vigorously. The U.K.'s 30-year yield is at a 30-year high, and France, Germany, Japan, and China are similarly experiencing commensurate rises.

Why should this concern us? More yields make it more expensive for governments to borrow, requiring it to be harder to pay for schools, healthcare, or roads without raising taxes or cutting spending. Economists state that some countries will have tough decisions to make that affect ordinary individuals.

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Different Views on Growth

Global institutions disagree on which direction the world economy will take.

  • The World Bank foretells weak growth, only 2.3% in 2025, with risks weighing most laboriously on poor countries.

  • The OECD predicts a slightly better 2.9%.

  • The IMF is more optimistic, forecasting 3.0% this year and 3.1% in 2026.

This division illustrates just how uncertain everything is. Debt, trade tensions, and political tensions bear on the negative side, but investment in technology could sustain growth.

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AI Takes Center Stage

One silver lining is technology. In the first six months of 2025, spending on artificial intelligence infrastructure—chips, data centers, and cloud computing—reached nearly 60% of global GDP growth, Deloitte reports. Meanwhile, expenditure on traditional factories and industrial projects declined.

This is a critical twist: AI leader nations may reap fantastic economic rewards, while others may be left behind. It also raises questions with regard to inequality, since not everyone has an equal chance of benefitting from these emerging technologies.

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What Comes Next

All these changes point to an economy in transition globally. There is a new bloc of nations challenging the old order, globalisation is splitting into strategic groupings, governments are struggling with indebtedness, and AI is becoming the driver of growth.

To young people and students, such trends are not theoretical: they might influence future job markets, the prices of consumer products, and opportunities for foreign study or work. The question is whether the changes will result in greater cooperation or in broader fissures.

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Bibliography

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Bangkok Patana Economist Club since 2023

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