Global economy to weaken over next year, Europe braces for slowdown: WEF report

The World Economic Forum’s latest Chief Economists Outlook paints a picture of contrasting economic fortunes across regions in 2025, with India and the US projected to grow, while Europe is expected to face challenges.

The January 2025 edition of the report highlights overall subdued global growth.

“The outlook remains subdued, with a majority of chief economists (56%) expecting the global economy to weaken over the next year, compared to 17% anticipating improvement,” the report said.

INDIA EMERGES AS BRIGHT SPOT

However, the report highlighted two bright spots amid the gloomy global economic outlook in the US and South Asia.

“South Asia continues to stand out, with 61% of chief economists expecting strong or very strong growth in 2025,” the report said.

The region’s exceptional performance is attributed largely to India, which “remains the world’s fastest-growing major economy.”

However, the report does note some potential challenges for India, observing that “there are now signs of some momentum being lost.” Recent national accounts data indicates a moderation in growth, though this appears to be a temporary adjustment rather than a fundamental weakness in the economy.

EUROPE TO BEAR THE BRUNT

In stark contrast to India’s robust outlook, Europe faces a particularly challenging period ahead. T

The report reveals that “the outlook for Europe remains gloomy, with 74% of respondents predicting weak or very weak growth this year.” This dramatic divergence between regions highlights the shifting dynamics of global economic power and the increasing importance of emerging economies in driving global growth.

Individual European economies show varying degrees of weakness, with Germany contracting by 0.3%, Italy growing at 0.4%, 1.2% in France and Spain managing 3.4% growth.

The severity of Europe’s situation was highlighted by Mario Draghi, the former Italian prime minister and governor of the European Central Bank, who warned that “annual investment equivalent to 5% of GDP would be required to revive economic dynamism.”

US TO PLAY KEY ROLE

The United States presents another interesting dimension to this global economic narrative. According to the report, “The chief economists expect US policy to have a significant impact on the global economy in the years ahead.”

“A majority (61%) characterise this impact as a long-term shift rather than a short-term disruption,” said the WEF report.

Under the incoming administration, economists anticipate “significant changes across trade, migration, deregulation, fiscal policy, industrial policy and foreign policy.” These changes are expected to have far-reaching implications, including potential “increases in inflation and public debt levels, as well as stock-market gains.”

China’s outlook also remains concerning, with growth “projected to slow gradually in the years ahead.” This slowdown in the world’s second-largest economy adds another layer of complexity to the global economic landscape.

The global context remains complex and challenging, as the report highlights.

“Downside risks have intensified, not least because of heightened uncertainty around the economic implications of November’s US presidential election.”