Global growth to drop to 2.7% in 2025: KPMG

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The gross domestic product (GDP) internationally is poised to slow from 3.2 per cent in 2024 to 2.7 per cent in 2025 before regaining some ground to 2.8 per cent in 2026, according to the latest KPMG Global Economic Outlook. The global GDP growth is expected to slow to rates not seen since the global financial crisis of 2008-9 as geopolitical and economic uncertainty become core themes for CEOs.
Meanwhile global inflation is expected to cool from 4.5 per cent in 2024 to 3.6 per cent in 2025 and hit 3.1 per cent in 2026.
The latest forecasts were outlined in KPMG International's first ever Global Economic Outlook webinar, which was attended by almost 2,000 executives across the world. The broadcast was designed to analyse and break down some of the challenges and opportunities ahead in such a complex period of time for the business community.
KPMG forecasts global GDP to slow to 2.7 per cent in 2025 amid rising geopolitical, policy shifts, and economic uncertainty. Business leaders cite volatility, tariffs, and trade disruptions as key concerns. KPMG urges companies to treat geopolitical risk as a strategic asset and stay agile in a shifting, multipolar and uncertain global landscape.
Current market and trading volatility was reflected in Live polling which was conducted during the global broadcast. Attendees were asked what their top concern was right now for their organisation, with more than a third (34 per cent) saying macroeconomic volatility was the biggest threat, while 30 per cent described geopolitical instability as their top concern. Meanwhile, nearly half (47 per cent) said their company's growth prospects had worsened since January. Furthermore, when asked about their organisation's strategic response to tariffs, only 40 per cent said they have no significant changes planned regarding their strategy for responding to tariffs and global trade dynamics.
'In today's business landscape, KPMG's latest global economic forecasts are unlikely to catch any business leaders by surprise. Throughout my experience engaging with CEOs, I've observed that uncertainty consistently ranks as their foremost concern. Currently, executives are adopting a 'pause and prepare' strategy, delaying significant investment decisions as they brace for potential economic downturns that may hinder growth aspirations. Despite today's challenges, it is crucial for business leaders to shift their focus toward identifying opportunities and viewing geopolitical risks as strategic assets rather than obstacles. This is an opportune moment to harness these insights to navigate the intricate global economic terrain. CEOs must remain informed, agile, and ready to adapt to swiftly evolving circumstances,' Regina Mayor, global head of clients & markets, KPMG International , said.
KPMG's Global Geopolitics team describes the current international scenario as a 'Critical Recession' – a transitional phase moving from a US-dominated era of globalisation toward a more multipolar world. This shift sees emerging powers, including India, Brazil, Mexico and Turkey, and economies in Southeast Asia, asserting their influence, leading to a more contested geopolitical environment.
'We now face potentially more global conflict than at any time since 1946. This historic surge in turmoil adversely affects supply chains and operations, particularly near critical trade nodes such as the Bab-El-Mandeb Strait/Suez Canal, the South China Sea, and the Panama Canal. These areas, essential for global trade, are increasingly vulnerable to disruptions owing to regional conflicts and overlapping sovereignty claims. The fragmentation of global trade, increased conflict and ongoing uncertainty over tariffs in the US is forcing business leaders to pause and adopt a 'wait and see' approach. Volatility is the new normal and companies should treat geopolitical risk as an asset, rather than a new threat. The imperative for businesses now is to develop a clear vision of how these geopolitical trends will affect their strategic objectives not only in the immediate term but over the coming years. With a deeper understanding of these geopolitical dynamics and proactive engagement in risk management, businesses can navigate the turbulent environment more adeptly, turning uncertainties into opportunities,' said Stefano Moritsch, head of global geopolitics, KPMG International .
Rampant policy shifts and escalating trade tensions are driving a predictable economic slowdown across the Americas. Pervasive uncertainty functions as an economic tax, stalling business investments and decision-making as executives across both North and South America grapple with a deeply unpredictable policy environment.
'Tariffs are predicted to rise significantly, scaling from a rate of 2.8 per cent to over 20 per cent by year-end. The uncertainty drove an unprecedented surge in the US trade deficit, almost doubling previous records due to stockpiling ahead of tariffs. It points to the frantic efforts of businesses to mitigate the immediate impact of tariffs,' said Diane Swonk, Americas chief economist, KPMG International.
Europe faces a modest growth outlook in the short term, as uncertainty weighs on business investment and consumer confidence, with Eurozone GDP expected to increase by around 0.9 per cent in 2025 and 1.1 per cent in 2026.
'Europe remains vulnerable to an escalation of tariffs, particularly on pharmaceuticals, which make up a large share of exports for a number of European economies. This continuing uncertainty is creating a degree of cautiousness in business planning and investments. The pivot to defence may offer an opportunity to provide greater focus on European research and development. This in turn could mean positive spillover opportunities for dual-use technologies, as well as research-intensive defence subsectors such as aerospace, cybersecurity, advanced robotics, and autonomous drones,' said Yael Selfin, European chief economist, KPMG International.
'The new US administration's trade policy changes are going to have some serious consequences for ASPAC economies. These repercussions are particularly severe due to the region's intertwined trade networks. Economies throughout the region may strategically pivot in response to these changes, whether through diversifying trade partnerships, investing in technology to enhance production efficiency, or bolstering domestic markets to mitigate impacts,' Dr Brendan Rynne, Asia-Pacific chief economist, KPMG International.
Fibre2Fashion News Desk (RR)