Global economy to weaken in 2025 on political uncertainty, rising debt: Report

A recent report indicates that the global economy will face severe challenges in 2025, with 56% of surveyed chief economists anticipating a deterioration in economic conditions. Only 17% of economists believe that the situation will improve, suggesting increased uncertainty in key regions and the need for cautious policy responses worldwide. The latest Chief Economists Outlook report released by the World Economic Forum highlights these concerns.

While the US economy appears poised for a short-term boost, with 44% of chief economists predicting strong growth in the US for 2025, up from 15% in the August survey last year, the outlook for other major economies remains less optimistic. Europe has been rated the weakest region for the third consecutive year, with almost three-quarters (74%) of economists expecting weak or very weak growth. Meanwhile, China’s economic growth momentum is expected to slow due to sluggish consumer demand and declining productivity, further illustrating the uneven and uncertain nature of the global recovery.

Angus Collins, Head of Economic Growth and Transformation at the World Economic Forum, stated, "The latest Chief Economists Outlook reveals that the global economy is under significant pressure. The outlook for economic growth is at its lowest level in decades, and domestic and international political developments highlight the contentious nature of economic policy. In this environment, fostering a spirit of collaboration will require more investment and creativity than ever before."

The report underscores the importance of the upcoming US presidential election, with 61% of chief economists viewing its impact on the global economy as a long-term shift rather than a short-term disruption. Significant changes are anticipated in areas such as trade, immigration, deregulation, fiscal policy, and industrial policy. The chief economists’ optimistic outlook for US economic growth in 2025 aligns with their expectations for short-term stimulus measures and wage increases. However, they remain wary of risks, with almost all anticipating a rise in public debt levels (97%) and an increase in inflation (94%).

In addition to the gloomy global economic growth outlook, the report reveals increasing pressure on the interconnectedness of the world economy. A vast majority of respondents (94%) expect further fragmentation in goods trade over the next three years, while 59% anticipate a similar path for services trade. Over three-quarters also expect increased barriers to labor mobility, while almost two-thirds point to increased restrictions on technology and data transfers. The financial sector is an exception, with less than half (48%) expecting increased fragmentation, possibly reflecting the critical role of cross-border capital flows in modern economies. Nonetheless, domestic and international political developments, supply chain adjustments, and security concerns remain prominent. These shifts are likely to drive up costs for businesses and consumers over the next three years. Measures businesses are expected to take in response to increased global economic fragmentation include restructuring supply chains (91%), regionalizing operations (90%), and focusing on core markets (79%).

Nearly half (48%) of chief economists expect an increase in global trade volume in 2025, highlighting the resilience of global commerce. However, a vast majority anticipate heightened trade tensions between major powers and more broadly. Protectionism is seen as a major driver of lasting changes to the global trade landscape, with other significant factors including conflict, sanctions, and national security concerns. Approximately 82% of respondents expect increased trade regionalization over the next three years, while a gradual shift from goods to services will continue.

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