Global growth set to slow in 2025

[MALAYSIA] The global economy is expected to experience a slowdown in 2025, with growth projections moderating across major regions. Analysts cite persistent inflationary pressures, tightening monetary policies, and ongoing geopolitical uncertainties as key factors contributing to the anticipated deceleration. While some economies may demonstrate resilience, the overall global outlook suggests a more cautious trajectory for the year ahead.​

Economic Growth Projections for 2025

According to the International Monetary Fund (IMF), global economic growth is projected to moderate in 2025, with a forecasted rate of 3.0%, down from 3.5% in the previous year. This adjustment reflects a combination of factors, including persistent inflationary pressures and tightening monetary policies implemented by central banks worldwide.​

In advanced economies, growth is expected to remain subdued as central banks continue to combat inflation through interest rate hikes. The United States, for instance, anticipates a growth rate of 2.2%, while the Eurozone is projected to experience a modest 1.8% expansion. Emerging markets, on the other hand, may see slightly higher growth rates, with China and India expected to grow at 5.5% and 6.2%, respectively.​

Inflation and Monetary Policy

Inflation remains a significant concern for many economies. In the United States, the Consumer Price Index (CPI) has remained above the Federal Reserve's 2% target, prompting continued interest rate hikes. Similarly, the European Central Bank (ECB) has maintained a cautious stance, adjusting rates to manage inflationary pressures.​

In emerging markets, inflation rates have also been elevated, influenced by factors such as supply chain disruptions and rising commodity prices. Central banks in these regions face the challenge of balancing inflation control with the need to support economic growth.​

Geopolitical Uncertainty

Geopolitical tensions continue to pose risks to global economic stability. Ongoing conflicts, trade disputes, and political instability in various regions contribute to market volatility and investor uncertainty. These factors can disrupt trade flows, affect investor confidence, and hinder economic growth prospects.​

In particular, tensions between major economies have led to shifts in global supply chains and trade patterns. Businesses are increasingly seeking to diversify their operations to mitigate risks associated with geopolitical instability.​

Sectoral Outlook

Certain sectors are expected to experience varying degrees of growth in 2025. The technology sector may continue to benefit from advancements in artificial intelligence and automation, driving demand for digital services and products. Conversely, industries reliant on traditional manufacturing processes may face challenges due to rising input costs and supply chain disruptions.​

The energy sector is also undergoing significant transformations. While fossil fuel industries may experience fluctuations in demand, renewable energy sources are gaining traction as governments and businesses prioritize sustainability initiatives.​

While the global economy is not expected to enter a recession in 2025, growth is projected to moderate compared to previous years. Inflationary pressures, tightening monetary policies, and geopolitical uncertainties are key factors influencing this outlook. Policymakers and businesses will need to navigate these challenges carefully to sustain economic stability and foster long-term growth.