Global Economic Growth Forecast for 2025: Subdued Recovery Amid Lingering Risks
The United Nations’ World Economic Situation and Prospects 2025 report, released on 9th January 2025, provides a cautiously tempered forecast for the global economy. The global growth rate is projected to remain at 2.8% in 2025, unchanged from the projection for 2024. While the global economy has shown remarkable resilience in withstanding a series of interconnected shocks, such as the COVID-19 pandemic, inflation, and geopolitical conflicts, the report indicates that growth remains far below the pre-pandemic average of 3.2%.
Several factors continue to weigh heavily on the global recovery, including weak investment rates, stagnant productivity growth, and rising debt levels. The report stresses that these challenges, coupled with slow recovery in certain sectors, mean the global economy is likely to experience a period of subdued growth, particularly in developing regions that have faced compounded difficulties such as conflict, climate change, and economic instability.
Monetary Easing and Inflation: Potential Relief Amid Uncertainty
One area where the global economy may see some relief in 2025 is in inflation rates and monetary easing. The report notes that global inflation is expected to decline slightly from 4% in 2024 to 3.4% in 2025, which will offer some respite to households and businesses. The easing of inflation is particularly welcome after a period of high price increases for goods and services globally.
However, the monetary easing policies that many countries have implemented to combat economic stagnation also come with their own risks, including high borrowing costs and increased debt burdens. As interest rates remain elevated in many parts of the world, this poses a challenge, especially for developing countries struggling with high debt servicing costs and limited access to international financing. Low-income countries are likely to bear the brunt of these challenges, as they are often the least equipped to handle financial volatility.
António Guterres, UN Secretary-General, in the foreword to the report, emphasized that the interconnected nature of the global economy means that shocks in one region have ripple effects across the world. He stated, “In our interconnected economy, shocks on one side of the world push up prices on the other. Every country is affected and must be part of the solution, building on progress made.”
Regional Economic Outlook: Divergence in Growth Prospects
The report outlines distinct regional outlooks for 2025, showcasing the uneven nature of global economic recovery:
• United States: Economic growth in the U.S. is expected to slow from 2.8% in 2024 to 1.9% in 2025, driven primarily by a cooling labor market and reduced consumer spending. The report notes that rising interest rates and inflation will continue to put pressure on household budgets, which in turn could dampen demand for goods and services.
• Europe: Europe’s recovery is expected to be modest, with the continent’s GDP growing by 1.3% in 2025, up from 0.9% in 2024. Easing inflation and resilient labor markets are expected to provide some support, but long-term challenges like weak productivity growth and an aging population continue to weigh heavily on the region’s growth prospects.
• East Asia: East Asia is expected to maintain solid growth, with the region’s economy forecast to grow by 4.7% in 2025, bolstered by China’s stable economic performance (4.8% growth), as well as strong private consumption across other countries in the region. However, uncertainties surrounding trade policies and supply chain disruptions continue to present risks.
• South Asia: South Asia is forecast to remain the fastest-growing region globally, with an expected growth rate of 5.7% in 2025, primarily driven by India’s 6.6% GDP growth. Other countries in South Asia are also expected to contribute to this robust growth, though regional inequalities persist, with some nations facing higher levels of vulnerability due to poverty, instability, and climate change.
• Africa: Africa’s economic growth is expected to increase modestly from 3.4% in 2024 to 3.7% in 2025. Growth will be supported by recoveries in key economies such as Egypt, Nigeria, and South Africa. However, challenges such as conflict, high debt levels, unemployment, and the increasing impacts of climate change continue to pose significant risks to Africa’s economic trajectory.
Global Trade and Inflation: Trade Rebound Faces Major Risks
Global trade is expected to see a 3.2% growth rate in 2025, building on a 3.4% rebound in 2024. The boost in trade will be driven by increased exports of manufactured goods from Asia and a surge in services trade. However, the report warns that trade tensions, protectionist policies, and geopolitical uncertainty are still major threats to global trade stability, especially as supply chains remain disrupted by regional conflicts and climate change.
Food inflation, although expected to ease globally, remains a significant issue, particularly in developing countries, where it is exacerbated by extreme weather events, conflict, and economic instability. The report notes that nearly half of developing nations faced food inflation rates exceeding 5% in 2024. This has deepened food insecurity, pushing vulnerable populations further into poverty.
Critical Minerals: A Double-Edged Sword for Developing Economies
Another focal point of the report is the potential for critical minerals to play a pivotal role in the global energy transition and in meeting the Sustainable Development Goals. Minerals such as lithium, cobalt, and rare earth elements are essential for the production of clean energy technologies, including electric vehicles, batteries, and solar panels.
For resource-rich developing countries, the rising global demand for critical minerals presents an unprecedented opportunity to boost economic growth, create jobs, and increase public revenues. However, the report stresses that these opportunities come with significant risks. Poor governance, unsafe labor practices, environmental degradation, and over-reliance on volatile commodity markets could undermine long-term development gains. Therefore, it is crucial for governments to adopt policies and regulatory frameworks that prioritize sustainable extraction, equitable benefit-sharing, and environmental protection.
Li Junhua, UN Under-Secretary-General for Economic and Social Affairs, emphasized that governments must be proactive in managing these resources responsibly, ensuring that the benefits of critical mineral extraction are shared equitably, and that the process does not exacerbate inequalities or damage ecosystems.
The Path Forward: Bold Multilateral Action Needed
To address the interconnected crises of debt, inequality, and climate change, the report calls for bold multilateral action. It stresses that monetary easing alone will not be sufficient to drive a global recovery or bridge widening economic disparities. Instead, governments must focus on investments in clean energy, infrastructure, and social sectors such as healthcare and education.
Moreover, international cooperation is necessary to manage the complex risks associated with critical mineral extraction, ensuring that developing countries can harness these resources responsibly and sustainably. The report calls for harmonized sustainability standards, fair trade practices, and technology transfers to ensure that global growth is equitable and inclusive, and that no one is left behind in the transition to a more sustainable future.
In summary, while the global economic outlook for 2025 remains cautious, targeted investments, improved international cooperation, and responsible governance of resources like critical minerals will be essential to ensure a resilient, inclusive, and sustainable global economy in the coming years.
