By Marta Vilar – MADRID (Econostream) – European Central Bank President Christine Lagarde said on Thursday that the global economy was entering a period of “genuine uncertainty” driven by geopolitical fragmentation and rapid technological change, as a result of which the range of possible economic outcomes had widened significantly.

In a speech at the 2026 Annual Global Risk Lecture speech in Bologna, Italy, Lagarde said the global economy was moving away from a world where risks could be measured using historical data and towards one where the underlying structure of the economy itself was shifting.

Lagarde said policymakers were now operating in an environment where “the system that generated yesterday’s data may not be the system generating tomorrow’s outcomes.”

This change meant traditional macroeconomic models were no longer sufficient to guide policymaking, she said, noting that those models had been calibrated on a world characterized by stable trade relationships and less disruptive technologies.

Lagarde said the ECB was responding to this environment by relying more on scenario analysis to assess alternative economic outcomes, which allowed policymakers to explore alternative paths “without relying solely on past data,”

She said the ECB had expanded its use of scenarios since the pandemic to examine possible shocks, including a cut-off of Russian gas, escalation of conflicts in the Middle East, trade fragmentation and higher defense spending.

Geopolitical fragmentation and the rapid development of artificial intelligence were the two dominant forces shaping the global economy today, according to Lagarde.

AI had the potential to significantly raise productivity, she said, citing estimates that the technology could lift annual productivity growth by as much as 1.5%. At the same time, she said geopolitical fragmentation could sharply reduce global output, with some estimates suggesting losses of up to 7% of global GDP over a decade.

Lagarde said the coexistence of these two forces meant the range of possible economic outcomes was now wider than it had been in decades.

Artificial intelligence was particularly vulnerable to fragmentation because its development depended on global supply chains, access to large markets and the availability of diverse data, she said.

Lagarde warned that abandoning international cooperation would amount to “economic self-harm” for major economies.

She said policymakers should pursue what she described as “layered cooperation,” combining reforms of global institutions, deeper collaboration among allies and minimum viable cooperation with geopolitical rivals.