Global economy set for moderate growth in 2025 amid rising geopolitical risks

The 2025 Global Economic Outlook: A Highly Uncertain World report, published by the Association of Chartered Certified Accountants (ACCA) in early February, examines key risks and economic prospects for major economies, featuring insights from distinguished economist Charles Goodhart and interviews with CFOs across different industries.

Goodhart highlights the considerable unpredictability surrounding the global economy, noting that while the United States may experience solid growth in 2025, the United Kingdom and Europe are likely to face economic challenges. He remains optimistic about India’s economic trajectory, forecasting continued expansion.

Regarding inflation, Goodhart anticipates a temporary decline in the short term but warns of upward pressure from 2026 onward, particularly in the US. He also underscores the role of AI in economic transformation, suggesting that while AI may not single-handedly resolve productivity challenges, it could contribute to reducing inequality within nations.

Jonathan Ashworth, chief economist at ACCA and author of the report, remarked, “The global economy should continue to grow at a reasonable, but not particularly exciting, pace in 2025. However, it is a world marked by significant uncertainty. The risks are predominantly on the downside, amid potential changes in US trade policy, a challenging geopolitical backdrop, political uncertainty, and rising government bond yields.”

The report highlights three major trends that could shape the global economy in 2025:

· The evolution of AI: The development of AI agents holds promise for productivity improvements. However, hybrid solutions integrating AI with other technologies will be crucial for driving sustained value.

· Geoeconomic fragmentation: There are concerns that shifts in US trade policy could accelerate a reversal of globalisation, creating challenges for international trade and investment.

· A retreat from green policies: Amid cost-of-living pressures and political transitions in developed economies, climate commitments are increasingly under strain, raising concerns about long-term sustainability.

Additionally, the report includes perspectives from seven CFOs across various sectors and regions, who expressed cautious optimism regarding global growth prospects. While a sharp downturn is not widely expected, businesses remain wary of multiple risks, including US trade policy shifts, geopolitical instability, inflation, climate-related challenges, and cybersecurity threats.

AI adoption remains a key focus for companies, with executives acknowledging both its transformative potential and disruptive implications. The evolving regulatory landscape, supply chain resilience, and digital transformation strategies are also high on corporate agendas.

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