The global economy should continue to grow at a reasonable but not particularly exciting pace in 2025. But we are in a world marked by significant uncertainty.
According to ACCA’s 2025 Global Economic Outlook, downside risks centre around changes in US trade policy resulting in large, sustained rises in tariffs that are much less targeted than during President Donald Trump’s first term and could lead to retaliation by trading partners.
Despite some slowing in growth, India is again set to be the fastest-growing major global economy
Other risks come from the challenging geopolitical backdrop, heightened political uncertainty and rising government bond yields.
US strength
Once again, the US economy looks set to be the strongest performer in the developed world in 2025, although growth could be slightly slower than last year. Growth is also expected to be quite slow in both the eurozone and the UK.
The Chinese authorities are set to step up their policy easing this year, although growth is generally expected to be slower than in 2024, albeit still above the global average.
And India, despite some slowing in growth, is again set to be the fastest-growing major global economy in 2025.
Speaking to ACCA, economist Charles Goodhart, while not having great confidence in how the near-term future will play out for the global economy this year given the enormous amount of uncertainty, suggests that the US economy will probably do very well in 2025, but Europe and the UK will do relatively badly. He remains generally optimistic about India’s prospects.
Global investors will be paying close attention to policy changes of new governments
As regards inflation, Goodhart thinks it could fall in 2025 but will likely rebound in 2026 and 2027. He also suggests that the worsening of the US fiscal position could begin to cause problems in 2026 and 2027. He does not see artificial intelligence (AI) as a panacea for the poor productivity performance of many countries but argues that it will reduce inequality within countries.
Policy shifts
After a very busy political year in 2024, global investors will be paying close attention to the likely policy changes of new governments around the world, particularly in the US. Key on the political front this year is the federal election in Germany, while elections in Canada and Australia will also be watched closely, as will political developments in France and South Korea.
Business leaders were not expecting a notable slowing in global growth but were cautious
In addition to monitoring the usual ebb and flow of economic and financial markets data throughout the year, we will be paying attention to three key trends in 2025: developments with AI; rising geoeconomic fragmentation; and further retreating by governments from policies intended to achieve the green transition.
Governance focus
As new regulations around AI come into force and adoption continues to grow, governance is likely to become an active consideration, alongside the potential sustainability implications. The last two trends are likely to be heavily influenced by political and policy developments throughout the year.
The business leaders ACCA spoke to as part of research for the 2025 outlook were not expecting a notable slowing in global growth but there was some caution given the significant global uncertainty, including that related to the policies of the incoming US president.
Technology, particularly AI, continues to be a priority, with businesses recognising both its potential and disruptive challenges. A wide range of risks were highlighted, including inflation (and changes in the price of important commodities), policy changes in large economies, cybersecurity, exchange rate movements, supply chains, climate change, social tensions, geopolitics and fast-changing consumer habits. The latter two were also cited as opportunities.
A recurring theme among CFOs is the need for agility, innovation and resilience in navigating an uncertain economic landscape.
More information
See ACCA’s economic updates including the quarterly Global Economic Conditions Surveys. The latest, Q4 2024, is now available.
Or watch on demand the 2025 global economic update webinar and earn 1 free CPD unit.
