The global economy in 2025 is set to navigate through a maze of trade wars, sluggish growth, and geopolitical risks, following a year of monetary easing and falling inflation. Countries that had cut interest rates to boost their economies in recent years are now hiking them back up to curb inflation.
The US Federal Reserve wrapped up December with a 25-basis-point rate cut, completing a total of 100 basis points for the year, bringing its policy rate to 4.25%-4.5%. Similarly, the European Central Bank (ECB) cut its rates four times in 2024, and the Bank of England also reduced its rate by 50 basis points, ending the year at 4.75%.
Despite these rate cuts, many countries still face weak economic growth and rising geopolitical tension, especially with the looming threat of escalating trade wars. Economists warn that additional tariffs, particularly those promised by US President-elect Donald Trump, could stifle global growth. Fitch Ratings forecasts a slight slowdown in global GDP growth to 2.6% in 2025, down from 2.8% in 2024, and warns that tariff hikes may hurt US exports and inflation.
The Eurozone is expected to experience a modest recovery, but it too faces challenges from the US’s trade policies. China’s economy, already slowing, will likely suffer from US tariffs, though fiscal easing could soften the blow.
Meanwhile, rising debt levels in developed nations remain a key concern. With fiscal pressures mounting, especially in the EU, significant structural changes and fiscal consolidation will be needed to keep economies on track. The global outlook for 2025 remains uncertain, with trade wars, debt crises, and geopolitical challenges casting long shadows over the world economy.
NEWS DESK
PRESS UPDATE