2025 Economic Markets: Year in Review

Report summary

Global economic growth moderated slightly in 2025 to around 3.2%, down from 3.3% in 2024, as the world economy adjusted to the cumulative impact of higher interest rates, tighter financial conditions, and rising policy uncertainty. Advanced economies expanded by approximately 1.5%, while emerging market and developing economies grew just above 4%, supported by relatively stronger domestic demand and investment momentum. Inflation continued to decline globally, though progress remained uneven: inflation was still above target in the United States, while it moderated more noticeably across Europe and parts of Asia. With price pressures easing overall, major central banks moved away from aggressive tightening and toward a more balanced policy stance, although interest rates remained elevated in many economies. The policy and investment environment was further shaped by heightened geopolitical and trade-related risks, including increased global protectionism and ongoing U.S.-China trade tensions that influenced supply chains and investor sentiment. Despite these headwinds, many economies demonstrated resilience, supported by relatively strong labor markets, fiscal buffers in key regions, and improving inflation dynamics.