The UN report predicts that world economic growth will remain subdued in 2025

The UN report predicts that the world economy will grow by 2.8% in 2025, the same as in 2024. Global growth will remain subdued, with China expected to achieve stable growth.

The UN's flagship World Economic Situation and Prospects 2025 report, released on Thursday, said that while the global economy has shown some resilience in weathering a series of overlapping shocks, global growth remains below the pre-coronavirus average of 3.2 per cent due to weak investment, weak productivity growth and high debt.

China's economic growth is expected to slow slightly, from 4.9 percent in 2024 to 4.8 percent in 2025, the report noted. Strong public investment and strong exports underpin growth. However, sluggish consumer spending, continued weakness in the housing sector, and a slow recovery in household confidence continue to weigh on economic activity.

Falling inflation and continued monetary easing in many economies could provide a modest boost to global economic activity in 2025. However, uncertainties remain significant, with geopolitical conflicts, rising trade tensions, and high borrowing costs in many parts of the world posing major risks. These challenges are particularly acute for low-income, fragile countries and could further undermine progress towards the Sustainable Development Goals.

Due to a weak labor market and slowing consumer spending, economic growth in the United States is expected to slow from 2.8 percent in 2024 to 1.9 percent in 2025. The European economy is expected to recover modestly, with GDP growth picking up from 0.9% in 2024 to 1.3% in 2025, mainly due to easing inflation and labor market resilience, but fiscal austerity and longer-term challenges such as weak productivity growth and an aging population will still weigh on the economic outlook.

East Asia's economic growth rate is expected to reach 4.7 percent in 2025, supported by strong private consumption in the region, with China expected to achieve stable growth at 4.8 percent. South Asia is expected to remain the fastest growing region, with gross domestic product (GDP) growth expected to reach 5.7 per cent in 2025, driven by India's strong 6.6 per cent growth.

Growth in Africa is expected to rise slightly from 3.4% in 2024 to 3.7% in 2025, driven by recovery in major economies such as Egypt, Nigeria and South Africa. However, conflict situations, rising debt service costs, a lack of jobs and the increasing impact of climate change are weighing on Africa's economic prospects.

In addition, global trade rebounded by 3.4% in 2024 and is expected to grow by 3.2% in 2025, thanks to improved exports of manufactured goods in Asia and strong services trade. However, trade tensions, protectionist policies, and geopolitical uncertainty remain significant risks to the outlook.

Global inflation is expected to fall from 4% in 2024 to 3.4% in 2025, bringing some relief to households and businesses. As inflationary pressures continue to ease, major central banks are expected to cut interest rates further in 2025.

For developing economies, the easing of global financial conditions has helped reduce borrowing costs, but access to capital remains uneven. Many low-income countries still face heavy debt-service burdens and limited access to international finance. The report stresses that governments should seize the fiscal space created by accommodative monetary policies and prioritise investment in sustainable development, especially in key social sectors.

Global inflation has eased and food inflation remains high

Although global inflation has eased, food inflation remains high, with nearly half of developing countries experiencing food inflation of more than 5% in 2024. This exacerbates food insecurity in low-income countries, which are already facing challenges from extreme weather events, conflict and economic instability.

The report highlights the potential of key minerals in the energy transition, such as lithium, cobalt and rare earth elements, as well as the potential to accelerate progress towards the Sustainable Development Goals in many countries.

For resource-rich developing countries, the growing global demand for key minerals offers a unique opportunity to boost growth, create jobs and increase public revenues for sustainable development investment. However, the report warns that poor governance, unsafe Labour practices, environmental degradation and over-reliance on volatile commodity markets can exacerbate inequality and damage ecosystems, undermining long-term development gains.

The UN report calls for bold multilateral action to tackle the interconnected series of crises of debt, inequality and climate change. The report stresses that governments must avoid overly restrictive fiscal policies and focus on mobilizing investment in key social sectors such as clean energy, infrastructure, and health and education.

Enhanced international cooperation is also critical to managing the environmental, social and economic risks associated with key minerals, the report said. Harmonized sustainability standards, fair trade practices and technology transfer are needed to ensure that developing countries can use these resources responsibly and equitably.