Page 10 - Policy Economic Report_Feb'25

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

Risks and Uncertainties
Several risks and uncertainties could impact the global economic outlook during 2025-2026:

• Policy Uncertainty: Potential policy changes, including trade restrictions and fiscal policies, could
affect global economic stability. For instance, proposed U.S. tariffs could reduce global economic
growth by 0.3 percentage points in 2025, assuming retaliatory measures from trading partners.

• Geopolitical Tensions: Ongoing geopolitical tensions, such as conflicts affecting commodity
markets, could pose risks to global growth. These tensions may lead to increased volatility in
financial and commodity markets, impacting investment and consumption decisions.

• Structural Challenges in Developing Economies: Developing economies, which contribute
significantly to global growth, are projected to face the weakest long-term growth outlook since
2000. Challenges such as high debt levels, weak investment, and the costs associated with climate
change are expected to hinder progress in these economies.

Global trade
World trade volume estimates are revised downward slightly for 2025 and 2026. The revision owes to the
sharp increase in trade policy uncertainty, which is likely to hurt investment disproportionately among
trade-intensive firms. That said, in the baseline, the impact of heightened uncertainty is expected to be
transitory. Furthermore, the front-loading of some trade flows in view of elevated trade policy
uncertainty, and in anticipation of tighter trade restrictions, provides some offset in the near term.

• Global trade rebounded in 2024, growing at 3.4%, driven by improvements in merchandise trade
and a robust expansion in services trade, particularly in the travel sector.

• The growth rate for world trade is projected to moderate to 3.2% in 2025, with uncertainties
remaining due to:

• Policy Uncertainty: Potential policy changes, including trade restrictions and fiscal policies,
could affect global economic stability. For instance, proposed U.S. tariffs could reduce global
economic growth by 0.3 percentage points in 2025, assuming retaliatory measures from
trading partners.

• Geopolitical Tensions: Ongoing geopolitical tensions, such as conflicts affecting commodity
markets, could pose risks to global growth. These tensions may lead to increased volatility in
financial and commodity markets, impacting investment and consumption decisions.

• Structural Challenges in Developing Economies: Developing economies, which contribute
significantly to global growth, are projected to face the weakest long-term growth outlook
since 2000. Challenges such as high debt levels, weak investment, and the costs associated
with climate change are expected to hinder progress in these economies.

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