Page 9 - FIPI - Policy Economic Report - May 2025

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

Figure 3: Global economic growth and the PMI

Source- S&P Global

2. Global economic outlook worsens amid trade conflict and policy uncertainty- United Nations
Report

According to the World Economic Situation and Prospects as of mid-2025, the global economic growth is
uncertain, marked by heightened trade tensions and elevated policy uncertainty. The recent surge in
tariffs—driving the effective U.S. tariff rate up steeply—threatens to raise production costs, disrupt
global supply chains and amplify financial turbulence.

Uncertainty over trade and economic policies, combined with a volatile geopolitical landscape, is
prompting businesses to delay or scale back critical investment decisions. These developments are
compounding existing challenges, including high debt levels and sluggish productivity growth, further
undermining global growth prospects. Global GDP growth is now forecast at just 2.4 per cent in 2025,
down from 2.9 per cent in 2024 and 0.4 percentage points below the January 2025 projection.

Slower global growth, elevated inflationary pressures and weakening global trade—including a
projected halving of trade growth from 3.3 per cent in 2024 to 1.6 per cent in 2025, thus jeopardize
progress toward the Sustainable Development Goals.

The slowdown is broad-based, affecting both developed and developing economies. Growth in the
United States is projected to decelerate significantly, from 2.8 per cent in 2024 to 1.6 per cent in 2025,
with higher tariffs and policy uncertainty expected to weigh on private investment and consumption. In
the European Union, GDP growth is forecast at 1.0 per cent in 2025, unchanged from 2024, amid weaker
net exports and higher trade barriers.

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