The global economy is facing mounting pressures and uncertainty that are expected to slow growth to just 2.3 percent in 2025, according to the latest report by the United Nations Conference on Trade and Development (UNCTAD). This forecast marks a significant deceleration and signals a shift toward a recessionary phase, with subdued demand, trade policy shocks, and financial turbulence weighing heavily on economic prospects worldwide.
Despite a somewhat stronger-than-expected growth rate of 2.8 percent in 2024, the outlook for 2025 is clouded by unprecedented levels of policy uncertainty—the highest recorded this century. The combination of geopolitical tensions, tightening macrofinancial conditions, and trade disruptions is creating a fragile environment, particularly for developing countries.
The report highlights that the uptick in global trade seen in late 2024 and early 2025 was largely driven by front-loaded orders, a momentum expected to fade or even reverse as new tariffs come into effect. Trade policy uncertainty is already impacting business confidence and long-term planning, with many firms delaying investments amid fears of further disruptions.
Capital flows to developing countries remain volatile, with investor caution intensified by tight financial conditions and systemic risks. This volatility threatens to undermine progress toward the Sustainable Development Goals, as fiscal priorities in major economies shift away from social spending toward defense budgets, and official development assistance declines.
While some regions such as Sub-Saharan Africa are projected to maintain moderate growth—around 3.6 percent in 2025—many low-income countries face a convergence of risks including heavy debt burdens and weakening domestic demand. The report warns that continued geoeconomic confrontations could trigger a “perfect storm” for poorer nations, exacerbating vulnerabilities and slowing development.
Commodity markets are not immune to the uncertainty, with fluctuating prices adding further pressure on economies reliant on exports of raw materials. Meanwhile, the expansion of commercial services has remained relatively firm, offering a modest buffer against the downturn in merchandise trade.
UNCTAD urges policymakers to avoid economic fragmentation and instead strengthen regional and international cooperation to build resilience. Coordinated policy responses, investment in sustainable development, and support for South-South trade partnerships are seen as critical to mitigating the risks posed by the current global environment.
The report underscores the need for decisive action to navigate the complex challenges ahead, emphasizing that without concerted efforts, the global economy risks slipping into a prolonged period of subdued growth and heightened instability.
