Global economic growth is projected to remain at 2.8 percent in 2025 and grow to 2.9 percent in 2026, largely unchanged compared to the last two years, according to the latest report from the United Nations Department of Economic and Social Affairs.
The World Economic Situation and Prospects 2025 report shows that despite withstanding a series of mutually reinforcing shocks, global economic growth has stagnated and remains below the pre-pandemic annual average of 3.2 percent.
While disinflation and monetary easing in a large number of countries are likely to boost aggregate demand, ongoing conflicts and rising geopolitical tensions could exacerbate challenges on the supply side. In addition, persistently tight fiscal space and lingering debt challenges in many developing countries will continue to constrain their ability to invest in productive capacities and stimulate economic growth.
India and Indonesia to see robust growth
The UN forecasts positive but somewhat slower growth for China and the United States. It also expects modest recoveries in the European Union, Japan and the United Kingdom and robust performance in some large developing economies, notably India and Indonesia.
The short-term outlook for many low-income and vulnerable countries remains less favorable. Economic growth in the least developed countries will likely improve slightly in 2025, but the UN has revised its forecast downward from its mid-2024 projections.
This subdued global economic growth reflects ongoing structural challenges such as weak investment, slow productivity growth, high debt levels and demographic pressures. Many developing countries are still grappling with the effects of the pandemic and other recent shocks.
While the green transition and technological advancements hold the potential to boost growth, any benefits that accrue may be disproportionately concentrated in developed economies. Meanwhile, many developing nations face significant hurdles in mobilizing financing to invest in critical infrastructure, technology and human capital and in moving up manufacturing and services value chains.
U.S. economy to grow 1.9 percent in 2025
With an estimated growth of 2.8 percent in gross domestic product (GDP), the United States economy outperformed expectations again in 2024 due to strong consumer spending, public sector spending and non-residential investments.
However, the UN report expects economic growth to moderate to 1.9 percent in 2025 and recover slightly to 2.1 percent in 2026 amid weaker labor market performance, modest income growth and looming cuts in public spending.
While further interest rate cuts will provide a tailwind for the economy, stubborn core inflation will likely keep the Federal Reserve cautious and discourage rapid monetary easing.
Europe’s growth to pick up to 1.3 percent
In contrast, economic growth in Europe will gradually pick up in 2025 and 2026 after a weaker-than-expected performance in 2024. In the European Union, economic growth will likely strengthen from around 0.9 percent in 2024 to 1.3 percent in 2025 and 1.5 percent in 2026.
Lower inflation, easing financing conditions and resilient labor markets will continue to support private consumption and investment. However, likely fiscal consolidation, ongoing geopolitical uncertainties and long-standing structural challenges such as population aging and weak productivity growth will constrain the pace of expansion.
Japan’s GDP to grow to 1 percent this year
In addition, Japan is poised for continued economic recovery. The UN report expects economic growth to pick up from around -0.2 percent in 2024 to 1.0 percent in 2025 and 1.2 percent in 2026.
Private consumption growth— having stalled since mid-2023 due to weak wage growth—will likely recover gradually while investments remain resilient. The Bank of Japan faces a policy dilemma, as excessive monetary tightening could push the economy back into deflation by slowing wage growth, which has only recently begun to accelerate.
China to see gradual economic moderation
On the other hand, China is facing the prospect of gradual moderation, with economic growth estimated at 4.9 percent for 2024 and projected at 4.8 percent for 2025. Public sector investments and strong export performance are partly offset by subdued consumption growth and lingering weakness in the property sector.
The Chinese authorities have stepped up policy support to lift property markets, address local government debt challenges and boost domestic demand. The shrinking population and rising trade and technology tensions could undermine medium-term growth prospects.
Saudi Arabia, Türkiye to bolster regional growth
The report expects economic growth in Western Asia to strengthen to 3.5 percent in 2025 from around 2.0 percent in 2024, driven by improved prospects in Saudi Arabia and Türkiye, the region’s two largest economies.
Economic performance in the region’s major oil-exporting countries will likely improve in 2025 thanks to the easing of oil production cuts by OPEC+. The six members of the Gulf Cooperation Council will enjoy relatively low inflation, supported by energy and food subsidies. In contrast, conflicts, persistently high inflation and tight fiscal space will weigh negatively on the outlook for oil-importing countries in the region.
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Global inflation to decline to 3.4 percent in 2025
In 2024, most central banks have shifted to monetary easing amid disinflation. The European Central Bank initiated this shift in June 2024 and the Bank of England followed in July. The Federal Reserve started easing in September, while the Bank of Japan moved in the opposite direction and began tightening in March.
By November 2024, 67 out of 108 central banks were in the easing phase, with 20 more likely to begin easing soon. The transition has been most evident in developed economies and Asian economies, while African central banks have been slower to ease rates amid persistent inflationary pressures.
Significant uncertainties remain regarding the duration and depth of the monetary easing cycle. However, global inflation will decline from 4 percent in 2024 to 3.4 percent in 2025, offering some relief to households and businesses.
