The global economy is expected to grow by 3.3 percent in 2025, up from 3.2 percent in 2024, according to the OECD, signaling stability in several indicators across key sectors. However, it may face major challenges due to geopolitical tensions and changes in the economic policies of major countries, which poses a threat, especially to developing economies.
Four key challenges will continue to shape the global economic landscape in the upcoming year including securing the stability of energy supplies from the Middle East, uncertainty surrounding trade and monetary policies of the new U.S. administration, the costs of damages caused by climate change, and the technological challenges associated with the effects of artificial intelligence.
Energy market dynamics
The ongoing conflicts in the Middle East, a region that accounts for around 30 percent of global oil demand, and Ukraine, whose ongoing conflict with Russia is putting pressure on European energy markets, continue to shape the global economic landscape, impacting energy supplies and production. Energy and oil expert Amer Al Shobaki told QNA that the global energy sector could see an increase in fossil fuel production in the United States in 2025, particularly with the new U.S. administration, complicating efforts to combat climate change.
Commenting on oil prices, Al Shobaki said that the crude market will face several variables in 2025. Global economic growth levels and the pace at which the U.S. Federal Reserve and the European Central Bank will reduce interest rates continue to impact demand. Demand will also depend on China’s ability to emerge from its economic crisis, noting that last November recorded additional growth in demand in China after a decline of about 7 months.
Al Shobaki expects oil prices to stabilize at levels close to $70 for Brent crude and $67 for West Texas crude, suggesting that supply would be equal to demand at levels of 104 million barrels per day. He added that gas-producing countries will likely benefit the most due to the growth in demand for electricity amid economic expansion and the growing adoption of artificial intelligence.
Trade and monetary policies under Trump’s administration
Another key factor shaping the global economic landscape in 2025 and beyond is the return of Donald Trump to the White House. Global markets expect the new administration to adopt protectionism by renegotiating agreements and increasing customs duties which may negatively affect international trade, which constitutes 33 percent of the global economy.
Trump pledged to impose big tariffs against America’s three biggest trading partners, Mexico, Canada, and China, and also threatened a 100 percent tariff on ‘BRICS’ nations. A renewed trade war with key players like China could disrupt global commerce, create supply chain bottlenecks and increase costs for consumers and businesses.
In this regard, businessman Ali Al Khalaf confirmed that the rise of China as a prominent player in global trade and its strong competition with the United States has created a strategic imbalance in terms of the balance of global trade. The invasion of Chinese goods in several developing countries’ markets and their emergence in European and American markets is a matter of concern for Western states in terms of its dominance of global markets, he added.
Markets are also preparing for major policy shifts, including deregulation and tax changes in 2025 as Donald Trump returns to the White House in January. Traders expect Trump’s expansionary policies to rekindle inflationary pressures and push the central bank to adopt a less dovish stance.
The Fed has already signaled a slower rate-cut pace in 2025 following its latest December meeting, citing a resilient economy and labor market. The U.S. central bank also noted that it needs to see inflation moving further towards its target of 2 percent before easing policy further.
Climate change and global economic growth
Another key factor shaping the global economic landscape in 2025 is climate change and its impact on growth. The high costs of damage resulting from the destruction of infrastructure, the decline in agricultural productivity and the increase in food and energy costs have remained persistent challenges, stated Dr. Omar Khalif Gharaibeh, professor of finance at the College of Business and financial and economic expert at Al al-Bayt University in Jordan.
The repercussions of natural disasters go beyond the destruction of infrastructure, the displacement of populations, the decline in agricultural productivity and other burdens on national budgets. They also include the disruption of supply chains, the increase in food and energy prices and the increase in insurance premiums, which impacts economic growth, deepens poverty crises in developing countries and increases financial instability.
Developing economies face a double dilemma: dealing with the effects of climate disasters and financing the transition to low-carbon economies. The investments required to shift towards clean energy pose a major challenge, especially for countries that rely mainly on fossil fuels in their economies. Therefore, these challenges call for strengthening international cooperation to ensure the stability of the global economy.
While countries are projected to invest nearly $2 trillion in clean energy in 2024, encompassing low-carbon power, infrastructure, energy efficiency, and electrification, an analysis by Moody’s Ratings indicated an annual climate mitigation investment shortfall of approximately $2.4 trillion by 2030. Investment in adaptation to climate change has received much less funding, primarily due to its limited commercial viability, which falls well short of the estimated annual requirement of around $400 billion, with only about $72 billion allocated in 2022.
Read: Dubai launches first-ever tax certification program in Arab world
Technological challenges and the rise of AI
Despite the promising opportunities that advanced technologies offer to enhance economic growth, technological disparity, automation and the dominance of advanced countries over technologies are likely to pose obstacles for developing countries and the overall global economic landscape. The artificial intelligence sector is expected to contribute up to $15.7 trillion to the global GDP by 2030.
Mohamed Alam, IT expert and general manager of Qatar Computer Systems, explained that artificial intelligence in 2025 will not only be a technical tool but also a driving force behind the radical transformation in vital sectors.
Developments in AI technologies, such as generative models and predictive data analysis will open new horizons for improving resource sustainability and increasing productivity. They will also play a major role in developing smart cities. This will contribute to improving energy and transportation management and reducing carbon emissions.
AI will also become the backbone of the global digital economy’s growth, enabling companies to enhance operational flexibility. In addition, AI applications in cybersecurity will become more advanced, with a focus on using adaptive algorithms to quickly and accurately monitor and prevent threats.
However, these advancements will pose new challenges, especially in the areas of privacy protection and ethical use, calling for the development of a comprehensive national framework to regulate the use of AI in line with ethical values and principles. Investing in developing human cadres specialized in AI will enhance the position of countries in this field, Alam added.
Developing economies will be the most vulnerable to the challenges shaping the global economic landscape which requires strengthening partnerships with developed countries and international institutions to ensure access to finance and technology, diversify their economies by developing productive sectors, shifting to renewable energy sources, and better managing their debts by improving financial transparency and avoiding excessive borrowing.
