Farooq Awan

The global economic outlook for 2025 presents a mixed picture, with moderating growth, easing inflationary pressures and lingering risks from geopolitical tensions and financial market uncertainties, according to the Monthly Economic Update and Outlook for December 2025 released by the Finance Division.

The report noted that global economic growth is projected to moderate in the coming year, following a period of relative resilience. According to international projections cited in the report, global output growth is expected to ease to around 3.2 percent in 2025 before moderating further in 2026. The slowdown reflects tighter financial conditions, elevated interest rates in advanced economies and subdued global trade activity.

Advanced economies are expected to experience slower growth as tighter financial conditions continue to weigh on investment and consumption, reflecting rising financial and trade-related risks.

The United States economy, while still showing near-term resilience, is projected to experience moderate growth, decreasing from 2.8 percent in 2024 to 2.0 percent in 2025 and further to 1.7 percent in 2026. Recent indicators, however, point to continued momentum, with economic activity remaining steady. The euro area is expected to register modest growth of around 1.3 percent, amid weak but improving industrial output.

In contrast, emerging economies are expected to show relatively stronger performance. China’s economy is projected to grow 5.0 percent in 2025, supported by a rebound in exports and policy measures aimed at stabilizing domestic demand, although structural challenges remain.

The global inflation outlook has improved, with headline inflation easing due to lower energy prices and easing supply-chain pressures. The FAO Food Price Index averaged 125.1 points in November 2025, down from a year earlier, reflecting declines in most food commodities.

Global trade growth is expected to outpace overall economic growth. Citing UNCTAD data, the report projects world real trade growth at 4.2 percent in 2025, with global trade volumes expected to exceed $35 trillion, supported by stronger manufacturing and services activity.

The report noted that while slower global growth and elevated uncertainty could weigh on exports and investment flows, resilient trade activity and easing inflation may provide some support for emerging economies, including Pakistan.

Credit: INP-WealthPk