The decline of linear economic forecasting amid persistent global shocks suggests a resilience-focused analytical framework that prioritises preparedness, adaptability, and scenario-based assessment over point predictions to better guide policy and institutions in a volatile, fragmented global economy.
The End of Predictability in the Global Economic Order
The first quarter of the twenty-first century has been one of the most transformative and turbulent periods in economic history. Changes witnessed over the past twenty-five years would have been almost unimaginable across the previous centuries. The early 2000s began with a period of strong, synchronised global growth, marked by robust expansion across major economies. Between 2004 and 2007, the world economy grew at an annual rate of around four per cent. The United States maintained steady growth, China expanded at double-digit rates, and India emerged as one of the fastest-growing major economies. This period reinforced confidence in linear forecasting models that extrapolated past trends and treated risks as temporary deviations rather than structural features of the system.
Linear Forecasting and the Illusion of Stability
During this phase of globalisation-driven expansion, economic projections relied heavily on stability assumptions. Supply chains were optimised for efficiency, geopolitics remained largely peripheral to economic modelling, and uncertainty was reduced to narrow confidence bands around a single growth number. Policymaking frameworks assumed that shocks were rare, short-lived, and reversible. Linear forecasts, therefore, appeared sufficient to guide investment decisions, fiscal planning, and monetary policy. This intellectual framework, however, was built on the premise of an orderly and predictable global economy.
The Lehman Crisis as a Structural Break
The global financial crisis triggered by the collapse of Lehman Brothers in 2008 marked a decisive turning point. What initially appeared as a financial shock originating in the United States rapidly transmitted across Europe and eventually affected Japan and emerging markets. The crisis exposed deep fragilities in global financial systems and demonstrated how tightly interconnected economies had become. More importantly, it shattered the assumption that global growth trajectories could be smoothly extrapolated. From this point onwards, the relevance of linear forecasting began to erode, as uncertainty became persistent rather than episodic
From Globalisation to Fragmentation
The post-crisis recovery did not restore the earlier era of stability. Instead, it ushered in an age of protectionism and strategic competition. The US–China trade war made economic nationalism explicit, transforming tariffs, export controls, and technology restrictions into tools of state power. Global trade and investment increasingly reflected geopolitical alignments rather than efficiency alone. The coronavirus pandemic further accelerated this shift by exposing vulnerabilities in global supply chains. The subsequent years, marked by Russia’s invasion of Ukraine and escalating conflicts in West Asia, reinforced the reality that geopolitical shocks are no longer exceptions but defining features of the global economy
The Collapse of Linear Thinking in a Shock-Prone World
In today’s environment, economic shocks are persistent, overlapping, and mutually reinforcing. Health crises, wars, climate events, and financial stress now interact in complex ways. Past trends cannot be extrapolated with confidence, and growth slowdowns cannot be dismissed as temporary interruptions. Linear forecasts, which assume mean reversion and stability, increasingly fail to capture the nature of modern risks. As a result, point estimates quickly lose relevance, and the focus must shift toward understanding vulnerability, adaptability, and systemic resilience.
Trade, Supply Chains, and the Rise of Strategic Economics
One of the most significant transformations in the global economy has been the evolution of trade and supply chains from efficiency-driven systems to resilience-oriented structures. Governments now prioritise security of supply, diversification, and strategic autonomy. Tariffs, sanctions, and friend-shoring are no longer short-term responses but embedded policy instruments. Supply chains are being redesigned to withstand disruptions rather than merely minimise costs. This shift reflects a deeper recognition that economic resilience has become inseparable from national security and long-term growth sustainability
Climate Change as a Macroeconomic Shock Multiplier
Climate change has emerged as a powerful amplifier of economic volatility. No longer a distant environmental concern, it now exerts immediate macroeconomic effects. Heatwaves reduce labour productivity, floods destroy infrastructure, droughts disrupt food supplies, and extreme weather events intensify inflation volatility. These impacts interact with existing economic fragilities, complicating fiscal planning and monetary policy. Traditional forecasting models, which rely on historical averages, are ill-equipped to capture the nonlinear and compounding nature of climate-related shocks.
Artificial Intelligence and Structural Uncertainty
Artificial intelligence represents another profound structural break. Unlike previous technological revolutions, AI introduces deep uncertainty about employment, productivity distribution, and social stability. While it holds the potential to enhance growth, it also risks widening inequalities and displacing large segments of the workforce. The policy challenge lies not merely in forecasting productivity gains but in ensuring that technological change does not undermine social cohesion. This requires a resilience-focused approach that emphasises adaptability, skills transformation, and institutional preparedness rather than precise growth projections.
Monetary and Fiscal Policy under Permanent Uncertainty
The resurgence of inflation after years of price stability has further challenged conventional macroeconomic frameworks. Inflation today is increasingly driven by supply-side disruptions rather than excess demand alone. High public debt, tightening financial conditions, and repeated global shocks constrain policy choices. In such an environment, rigid policy rules based on linear forecasts can be counterproductive. Economic research must therefore revisit how monetary and fiscal frameworks operate under conditions of chronic uncertainty, where flexibility and buffers matter more than precise targeting.
From Forecasting to Preparedness in Economic Analysis
The era of single-number forecasts is effectively over. Economic analysis must now embrace scenario-based thinking that explores a range of plausible outcomes rather than a single expected path. High-frequency data, stress testing of institutions, and real-time indicators are becoming essential tools. The objective is no longer prediction for its own sake but preparedness. Policymakers require early warning signals and flexible response options that enable rapid adjustment when shocks occur.
Redefining the Role of Economic Research
Resilience-focused analysis is inherently interdisciplinary, drawing on insights from economics, geopolitics, climate science, and technology studies. Economists must evolve from forecasters to risk managers, from model perfection to actionable policy insight. Economic research must help governments and firms navigate complex trade-offs in real time rather than offer retrospective explanations. Policy relevance, not academic elegance alone, becomes the defining criterion for effective analysis.
Resilience as the New Economic Order
In conclusion, the global economy has entered an era in which volatility is structural, uncertainty is permanent, and shocks are inevitable. In such a world, linear forecasts may offer comfort but provide little guidance. Resilience-focused economic analysis offers a more relevant compass by prioritising robustness over precision and preparedness over prediction. The ultimate purpose of economic analysis today is not to tell us exactly what will happen tomorrow, but to ensure that when disruptions occur, economies and institutions are ready to absorb, adapt, and recover. This intellectual shift is no longer optional; it is the defining responsibility of economic thought in our times.
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