The global economy faces growing risks in 2025, just as it began recovering from the COVID-19 pandemic, as reported by Reuters.
In 2024, central banks successfully reduced interest rates after fighting inflation without triggering a recession, and stocks reached record highs. However, voters reacted negatively, punishing incumbents worldwide for the rising cost of living due to post-pandemic price hikes.
Looking ahead, challenges include the potential for a trade war if a Donald Trump presidency imposes tariffs, possibly leading to inflation or a global slowdown. Conflicts in Ukraine and the Middle East, political deadlocks in Europe, and uncertainty in China add further complexity. Climate damage costs are also rising as a concern.
Governments’ growing debt risks a financial crisis if they continue to pile on more borrowing. Central bankers warn of continued uncertainty in 2025, with inflationary policies and global trade disruptions potentially worsening economic conditions.
The World Bank notes that the poorest countries face their worst economic situation in two decades, missing out on the post-pandemic recovery. Meanwhile, wealthier nations need to address voters’ declining living standards and tackle new spending priorities, such as climate change, military spending, and aging populations. Healthy economies will be essential to fund these needs.
