London, December 01, 2025
Global economic growth is slowing markedly in 2025 due to escalating trade tensions, US tariffs, and geopolitical uncertainties disrupting commerce worldwide. This slowdown threatens to undermine the post-pandemic recovery and raises concerns about recession risks globally.
Drivers Behind the Growth Slowdown
A reintroduction and escalation of trade tariffs by the United States have significantly increased costs and uncertainty in international markets. These tariffs, combined with ongoing geopolitical tensions and rising protectionism, have unsettled global supply chains and dampened business confidence. Companies across various regions are delaying or scaling back investment as trade policy uncertainty ranks as the top concern among executives worldwide.
Impact on Global GDP and Regional Variations
After a steady global GDP growth rate of approximately 2.8% in 2024, forecasts for 2025 have been revised downwards to around 2.6–3.0%, with some forecasts extending further declines into 2026. This represents the slowest pace of growth since the world recovered from the Covid-19 pandemic.
The eurozone, heavily dependent on international trade, is particularly affected. Its growth projection fell from 1.3% to 0.9% in 2025, with Austria experiencing contractions around -0.3%. Meanwhile, the world’s two largest economies, the US and China, are both decelerating. China faces additional deflationary pressures and a weakening housing market, limiting its ability to offset global headwinds. In contrast, India maintains comparatively robust growth above 6%, providing a rare bright spot amid widespread economic softness.
Business Sentiment and Recession Risks
Surveys indicate that over half of business executives now assess the likelihood of a global recession within the next one to two years as significant. This growing caution reflects the challenges that trade barriers and geopolitical disputes pose to economic stability and recovery. Investment decisions remain tentative, and many firms are bracing for further volatility.
Context of the Post-Pandemic Recovery
The current slowdown interrupts what had been a steady post-pandemic economic recovery. Global growth at 2.6–3.0% represents the slowest rate since economies rebounded from the disruptions caused by Covid-19. Without resolution of trade conflicts and easing of geopolitical tensions, the global economy risks extended stagnation or contraction.
Despite pockets of resilience, notably India’s sustained expansion, the overall outlook remains subdued. Policymakers and business leaders face urgent challenges in navigating the fragile balance between protecting domestic interests and fostering international economic cooperation.
In this critical juncture, overcoming trade tensions and geopolitical barriers is essential to restore confidence and reinvigorate global growth momentum.