The United Nations Conference on Trade and Development (UNCTAD) has projected that global economic growth will decelerate to 2.3% in 2025, signaling a recessionary trajectory amid escalating trade tensions and persistent uncertainty. This forecast is outlined in UNCTAD’s report titled Trade and Development Foresights 2025—Under Pressure: Uncertainty Reshapes Global Economic Prospects.
Factors Contributing to Economic Slowdown
The report attributes the anticipated slowdown to several key factors:
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Trade Policy Shocks: Recent tariff actions, particularly those imposed by major economies, have disrupted supply chains and eroded predictability in global trade.
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Financial Volatility: Fluctuations in financial markets have heightened uncertainty, affecting investment decisions and economic stability.
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Rising Uncertainty: The combination of geopolitical tensions and inconsistent trade policies has led to a climate of uncertainty, impacting global economic confidence.
These factors have collectively contributed to a decline in global trade growth, with trade growth lagging behind GDP for the first time in 25 years. The World Trade Organization (WTO) has warned that continued restrictive trade practices and geopolitical economic confrontations could disrupt international trade flows and supply chains, further dampening global economic activity.
Impact on Developing Economies
Developing economies are particularly vulnerable to these disruptions. UNCTAD highlights that these nations often face higher tariffs and limited market access, which can hinder their economic growth. For instance, agricultural exports from developing countries face import duties averaging almost 20%, while textiles and apparel remain subject to some of the highest tariff rates, limiting competitiveness in these industries.
However, the report also notes that South-South trade—trade between developing countries—can serve as a source of resilience, offering opportunities for growth and diversification. By strengthening intra-regional trade, developing economies can mitigate the adverse effects of global trade disruptions.
Policy Recommendations
UNCTAD emphasizes the need for coordinated global efforts to mitigate trade tensions and uncertainties. The organization advocates for structural reforms and coordinated global efforts, proposing a comprehensive strategy that includes both supply-side policies to boost investment and demand-side measures to improve employment and income.
In conclusion, while the global economy faces significant challenges in 2025, there are avenues for resilience and growth, particularly through enhanced cooperation among developing economies and strategic policy interventions.
