Global Economic Growth to Strengthen in 2025 Despite Hurdles

The global economy is poised for accelerated growth in 2025 despite the challenges, according to GlobalData. Geopolitical tensions and potential shifts in policy could disrupt growth and deepen regional inequalities, the analytics company said.

The direction of US policy under a new administration could reshape international trade, monetary policy, and economic cooperation. On the brighter side, easing inflation and the supportive measures from central banks across key economies offer a sense of optimism. Against this backdrop, the global economy is forecast to grow by 2.54% in 2025, up from a projected 2.52% growth in 2024.

GlobalData’s report projects increased growth in Europe (1.40% in 2024 to 1.52% in 2025), Asia-Pacific (3.51% to 3.63%), and the Middle East & Africa (MEA) (2.31% to 3.74%). As global inflationary pressures ease, central banks worldwide have adopted accommodative monetary policies, which are expected to stimulate consumption and investment, supporting overall global growth. In the MEA region, growth in the non-oil sectors and the end of oil production cuts in 2025 are expected to boost economic sentiment, although geopolitical tensions continue to pose risks.

Economic growth in the Americas, however, is projected to slow from 2.28% in 2024 to 1.83% in 2025, amid uncertainties around President-elect Trump’s policies, including tariffs and tax cuts. These could fuel inflation and worsen the federal deficit, complicating the Federal Reserve’s rate decisions. Additionally, structural challenges such as low productivity and outdated infrastructure continue to limit growth in Latin America.

“While the global economy is on the road to recovery, its growth depends on effective management of inflation, geopolitical risks, and regional disparities. In the 4Q24 update, GlobalData kept its 2024 global economic growth forecast at 2.52% but slightly lowered the 2025 projection by 0.06 percentage points to 2.54%. This adjustment reflects the impact of rising geopolitical tensions and potential supply disruptions carrying over into the next year,” said Annapurna Pillutla, Analyst in the Economic Research team at GlobalData.

GlobalData forecasts the global inflation rate to decrease from 5.80% in 2023 to 4.28% in 2024, with a further decline to 3.45% anticipated in 2025. In 2025, inflation is expected to drop across all regions: the Americas (excluding Argentina and Venezuela) to 4.54% from 5.04%, Asia-Pacific to 4.31% from 4.54%, Europe to 3.28% from 4.17%, and the MEA to 16.37% from 24.85%. “These reductions reflect ongoing efforts to manage inflationary pressures globally. By November 2024, 10 of 11 G10 nations began rate cuts due to easing inflation. Switzerland’s SNB reduced the key rate to 1%, Canada’s BoC cut it to 3.75%, and Sweden’s Riksbank lowered it to 2.75%. The ECB made three cuts, targeting neutrality by 2025. The US Fed and the UK’s BoE each reduced rates twice, with both at 4.75%,” added Pillutla.

On the external side, global merchandise trade grew by 2.3% annually in 1H24, driven by easing inflation and rate cuts in advanced economies. Meanwhile, the Global Supply Chain Pressure Index averaged -0.27 from January to October 2024, up from -0.72 in the same period of 2023, primarily due to disruptions in the Red Sea from the Israel-Hamas conflict. This disruption led to a 66% drop in Suez Canal traffic by October 2024 and higher shipping costs.

The 2024 global election cycle has brought about notable political shifts across regions, potentially influencing economic outcomes. In Europe, far-right parties are gaining ground, Latin America faces political instability, and African nations like Botswana are undergoing power transitions. Trump’s victory may lead to more protectionist US policies, impacting global trade. In the Middle East, the Syrian regime under Bashar al-Assad collapsed in December 2024. The fall of his government marked a significant setback for allies Russia and Iran, who had supported his leadership throughout the conflict.

“Broader geopolitical realignments, including US-China tensions, regional challenges in the MEA, and the potential resolution of the Ukraine conflict, are expected to reshape the global economic landscape in 2025. The outlook is cautiously optimistic, with growth hinging on central bank policies and geopolitical developments. The global economy remains fragile, with potential for either acceleration or slowdown in growth,” concluded Pillutla.