From climate issues and geopolitical tensions to technological advancements, several critical challenges have defined the past few years. Now that we’re in 2025, the world will continue to face such concerns against a stable yet subdued economic backdrop.
Economic outlook
According to a report from the Organization for Economic Co-operation and Development (OECD), the global economy could grow at a steady rate of 3.3 percent this year, a figure marginally higher than 2024’s 3.2 percent.
This prediction aligns with the estimates of the International Monetary Fund (IMF) in its World Economic Outlook. Released in October last year, the report showed that global growth is expected to hit 3.2 percent this 2025. However, the IMF noted that while there is moderate growth in advanced economies, emerging markets — particularly India and China — will continue to lead, albeit at slower rates. For instance, India, a country that recorded an 8.2 percent growth in 2023, could have a GDP growth of 6.5 percent in 2025. Meanwhile, growth in the U.S. could decelerate to 2.2 percent, driven by gradually tightening fiscal policy and a cooling labor market.
In the World Bank’s December report, the organization emphasized that the world is at a critical point, as the year 2025 marks the end of the first quarter of the 21st century. Without a course correction, data shows that 20 of 26 countries will likely remain poor through the next 25 years.
This pivotal moment highlights the urgency of fostering sustainable growth strategies, particularly in low-income and developing economies. The World Bank stresses that without deliberate and targeted interventions, the economic divide between nations is likely to widen further. But it’s not only the developing nations that face substantial hurdles. For advanced economies, the challenge lies in addressing stagnant growth, with projections of only 1.5 percent in 2024 and a modest uptick to 1.7 percent by 2025, at least, according to a separate World Bank report in June 2024. According to the World Bank, while the global economy is stabilizing for the first time in three years, the level at which it is growing is still relatively low compared to historical standards.
Read more: AI to add $19.9 trillion to global economy, account for 3.5 percent of GDP by 2030
Energy dynamics and U.S. policies
This year, the economic landscape is poised to be shaped by four pivotal factors: The delicate dynamics in the energy market, the continued influence of the U.S. Federal Reserve, climate change, and technology.
In the energy frontier, geopolitical tensions across the globe will continue to put pressure on energy markets. In 2025, oil prices will have to face various variables. Ongoing conflicts will affect energy production and supply. Meanwhile, the demand side will also hinge on China’s capacity to navigate its economic crisis.
According to energy and oil expert Amer Al Shobaki, oil prices could hover around $70 for Brent crude and $67 for West Texas crude.
Speaking of the Fed, the U.S. is expected to experience changes in trade and monetary policies under Trump’s administration. His administration is likely to pursue protectionist policies, including renegotiating trade agreements and increasing customs duties. Trump has pledged to impose high tariffs on major trading partners like Mexico, Canada, and China, and even threatened a 100 percent tariff on BRICS nations. A renewed trade war, particularly with China, could disrupt global commerce, create supply chain issues, and increase costs for businesses and consumers.
Additionally, major policy shifts are expected under Trump’s administration, including deregulation and tax reforms. Expansionary policies could fuel inflationary pressures, forcing the Fed to adopt a more cautious approach. After its December 2024 meeting, the Fed signaled a slower pace of rate cuts in 2025, citing strong economic and labor market conditions. It also stressed the need for inflation to approach its 2 percent target before further easing monetary policy.
Climate change and tech advancements
Inevitably intertwined with economic growth is climate change. Various natural disasters prove to be disruptive, especially in terms of infrastructure and population displacement. In 2022, a record 32.6 million people were displaced globally due to disasters. An alarming trend that could continue in 2025 and beyond, this displacement negatively impacts local economies. It hampers productivity and strains government budgets.
Climate change can also disrupt supply chains. Subsequently, it can drive energy and food prices upward. These repercussions are particularly pronounced in developing economies — and these are the very economies that already face issues in financing their transition to low-carbon economies.
According to the World Economic Forum (WEF), the world needs to close an investment gap of $30 trillion to hit the net-zero emissions target by 2050. Additionally, an analysis by Moody’s Ratings projected an annual shortfall of around $2.4 trillion in climate mitigation investments by 2030. This situation implores collective action from both the private and public sectors.
The disparity extends beyond sustainability efforts, as economies worldwide also face significant technological gaps. While the artificial intelligence (AI) sector is predicted to inject up to $15.7 trillion to the global economy by 2030, many countries risk being left behind due to unequal access to the infrastructure, talent, and investment needed to harness AI’s potential.
In the Middle East, initiatives like Saudi Arabia’s Vision 2030 and the UAE’s Artificial Intelligence Strategy 2031 aim to position the region as a global leader in technological innovation and AI adoption. These programs focus on diversifying economies, fostering innovation, and building a skilled workforce to capitalize on the transformative potential of AI. Additionally, regional tech hubs such as Dubai Internet City and partnerships with global tech giants are helping to drive investment in AI research and development.
