The global economy stands at a precarious turning point, with escalating trade tensions, rising tariffs, and growing policy uncertainties threatening to derail growth and sustainable development, according to a new report from the UN Department of Economic and Social Affairs (UN DESA) released Thursday.
Amid inflationary pressures and weakened investment sentiment, the global GDP growth forecast for 2025 has been cut to 2.4%, down from 2.9% in 2024, and 0.4 percentage points lower than the previous projection made in January 2025.
TRADE WARS, TARIFF SHOCKS, AND FRAGILE SUPPLY CHAINS
The report warns that higher tariffs and protectionist trade policies are disrupting global supply chains. These actions are raising production costs. They are also delaying crucial investments. These dynamics are particularly damaging for trade-dependent and developing economies, where export revenues and growth prospects are being hit hardest.
“The tariff shock risks hitting vulnerable developing countries hard, slowing growth, slashing export revenues, and compounding debt challenges,” said Li Junhua, UN Under-Secretary-General for Economic and Social Affairs.
Global trade growth is projected to plunge from 3.3% in 2024 to just 1.6% in 2025, further jeopardizing progress toward the Sustainable Development Goals (SDGs).
WIDESPREAD ECONOMIC SLOWDOWN ACROSS REGIONS
- United States: Growth expected to slow sharply from 2.8% in 2024 to 1.6% in 2025, with tariffs and policy uncertainty dampening investment and consumption.
- European Union: Growth stagnant at 1.0%, weighed down by weaker exports and trade barriers.
- China: Growth to decelerate to 4.6%, hit by weak consumer sentiment, manufacturing disruptions, and ongoing property sector woes.
- India: Despite a downgrade to 6.3% growth, India remains one of the fastest-growing large economies.
- Brazil, Mexico, South Africa: Facing downgrades due to weakening trade, sluggish investment, and falling commodity prices.
- Least Developed Countries (LDCs): Growth forecast reduced from 4.5% in 2024 to 4.1% in 2025, with debt distress risks mounting.
INFLATION STUBBORNLY HIGH, FOOD PRICES REMAIN A MAJOR CONCERN
While global inflation eased to 4.0% in 2024 (down from 5.7% in 2023), many countries are still grappling with above-average inflation rates:
- Two-thirds of countries reported inflation exceeding pre-pandemic levels in early 2025.
- Over 20 developing economies face double-digit inflation.
- Food inflation remains alarmingly high at 6%+, disproportionately impacting low-income households in Africa, South Asia, and Western Asia.
Compounded by climate shocks and trade restrictions, these price pressures are deepening vulnerabilities, making coordinated policy responses urgent.
MONETARY POLICY DILEMMAS AND FISCAL CONSTRAINTS
Central banks are facing difficult trade-offs as they attempt to balance inflation control with supporting sluggish economies. Meanwhile, limited fiscal space—especially in developing nations—restricts governments’ capacity to respond effectively.
The report underscores the need for:
- Credible monetary frameworks to manage inflation.
- Targeted fiscal support for vulnerable populations.
- Long-term strategies for price stability and inclusive growth.
GEOPOLITICAL FRAGMENTATION THREATENS DEVELOPMENT GOALS
The report warns that rising geopolitical fragmentation is worsening the economic downturn. Strained multilateral cooperation is also a contributing factor. The situation threatens progress in poverty reduction, job creation, and inequality reduction.
For LDCs and small economies, declining export revenues are worsening fiscal pressures. Tighter financial conditions add to these pressures. Reduced official development assistance (ODA) further raises debt sustainability concerns.
CALL FOR MULTILATERAL ACTION: SEVILLA CONFERENCE IN FOCUS
To address these mounting challenges, UN DESA emphasizes the urgent need to revitalize the multilateral trading system and provide targeted support to vulnerable economies.
The upcoming Fourth International Conference on Financing for Development, set for 30 June to 3 July 2025 in Sevilla, Spain, is seen as a crucial platform to:
- Strengthen multilateral cooperation.
- Address debt sustainability.
- Drive concrete actions for financing sustainable development.
“Strengthening multilateral cooperation is essential to foster sustainable and inclusive development in an increasingly fragmented world,” the report concludes.
KEY PROJECTIONS & FIGURES
- Global GDP Growth: 2.4% in 2025 (down from 2.9% in 2024)
- Global Trade Growth: Slowing to 1.6% in 2025 (from 3.3% in 2024)
- US Growth: 1.6% in 2025 (down from 2.8% in 2024)
- China Growth: 4.6% in 2025
- India Growth: 6.3% in 2025 (revised downward)
- Global Inflation: Averaging 4.0% in 2024; food inflation above 6%
- LDC Growth: 4.1% in 2025 (down from 4.5% in 2024)