Global growth may slow to recessionary 2.3% in 2025, says UN trade agency

New Delhi: The global economy may lose momentum in calendar year 2025 with growth expected to slow to 2.3%, the UN Conference on Trade and Development (UNCTAD) said in a report on Wednesday. 

Growth estimates for CY2025 fall below the 2.5% threshold that marks a global recessionary phase, signalling a significant slowdown compared to even the already subdued pre-pandemic growth trends, said the report. The global economy recorded a growth of 2.8% in 2024.

UNCTAD forecasts a slowdown across major economies, with India’s growth expected to ease from 6.9% in 2024 to 6.5% in 2025, China’s from 5% to 4.4%, and the US from 2.8% to 1%, while the European Union is projected to see a slight uptick from 0.9% to 1% over the same period.

"The global outlook for 2025 is clouded by heightened policy uncertainty, the levels of which in early 2025 were the highest observed in this century," the report titled ‘Trade and Development Foresight -- 2025 Under Pressure: Uncertainty Reshapes Global Economic Prospects’ said.

"Notwithstanding the details of the new tariffs the United States announced on 2 April 2025, the prevailing levels of policy uncertainty affect economic activity negatively as companies encounter losses and put off investment and hiring decisions," it added.

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The report noted that the implementation of successive rounds of restrictive trade measures and geoeconomic confrontations carry the risks of severe disruptions to border-crossing production lines and international trade flows, in turn pulling down economic activity globally.

US President Donald Trump’s proposal to impose sweeping reciprocal tariffs on countries that impose higher duties on American goods has reignited fears of a global trade war, with economists and trade experts warning of widespread disruption to global supply chains and heightened uncertainty for exporters.

The policy—central to Trump’s revived 2024 presidential campaign—has led to the US matching or exceeding tariffs imposed by trading partners, targeting countries such as China, India, and the European Union.

Earlier in April, the Trump administration imposed a 27% reciprocal tariff on Indian goods, claiming the South Asian country levies an average of 52% on US imports.

However, it soon paused the tariff on trading partners, excluding China, for 90 days. The US reciprocal tariff on India temporarily stands at 10%.

The latest UNCTAD report said that concerns over the global economic context and the impact of trade policy shifts have translated into major financial turbulence with sharp corrections and significant losses in financial markets in April.

"With the so-called financial ‘fear index’ at its third highest level – after the peaks of 2008 and 2020 – fears of recession in the United States are growing, while the international ramifications of tariff tensions add to investor anxiety regarding the prospects for economies worldwide," it said.

"Developing countries are vulnerable to global financial volatility, with the economies of Asia – the region most integrated into the global value chains – particularly affected by financial turbulence," it added.

To be sure, India’s economic growth is expected to remain resilient during FY26, supported by sustained government spending and a potential revival in private investments.

However, experts have warned of risks to exports from escalating US tariffs and a widening trade war.

To this extent, Moody’s Analytics has trimmed its calendar year (CY) 2025 growth forecast for India to 6.1%, lowering it by 30 basis points from its March projection, in response to US tariffs.

"On the one hand, the recent financial boom has been concentrated in the technology stocks of advanced economies, with companies from developing countries finding it difficult to raise capital," the UNCTAD report said.

"On the other hand, while current gyrations in the financial markets can accelerate financial inflows into some emerging market assets, in the context of systemic uncertainty, trade tensions and slowing demand, short-term speculation adds to financial stability risks," it added.