Trends and Prospects of Global Economic Development: Risks and Opportunities

<p style="text-align: right;">doi.org/10.52340/eab.2025.17.01.01 <a href="http://eb.tsu.ge/doc/1_2025.pdf" target="_blank"><strong>journal N 1.2025</strong></a> <p style="text-align: justify;"><br />The article analyzes the trends and prospects of global economic development in the short-term and medium-term. The analysis covers not only the global economy as a whole but also the economies of individual countries, regions, and groups of countries. The dynamics of key macroeconomic indicators are examined, including GDP growth rates, inflation, unemployment, investment, public finances, and the balance of payments. Factors such as the cyclical nature of economic development, the macroeconomic situation, and the influence of geopolitical factors are taken into account. The article highlights the high uncertainty regarding future developments, with the possibility of both positive and negative scenarios for the global economy. <p style="text-align: justify;"><strong>Keywords:</strong> Global economy, global trade, trends and prospects of development, global crisis, geopolitical conflicts, economic cycle, GDP growth, inflation, unemployment rate, investment, balance of payments, public finances, budget deficit, national debt. <p style="text-align: justify;"><strong>JEL Codes:</strong> E01, E32, E44, F01, F43 <p style="text-align: justify;"><strong>Factors Determining the Trends and Prospects of Global Economic Development</strong> <p style="text-align: justify;">Several fundamental factors will determine the development of the global economy in the short-term and medium-term. First, cyclical fluctuations in the economies of various countries, regions, and the global economy as a whole. The long period of relatively stable growth in most developed countries following the global economic crisis of 2007-2009 (with the exception of 2020, when shocks occurred due to the COVID-19 pandemic) potentially carries risks related to a shift in the phase of the economic cycle.<br />Noting the successes in the fight against inflation, the IMF highlights that "the risks of deterioration are increasing and currently dominate the forecasts." At the same time, fundamental problems remain, such as the high levels of government and corporate debt in many countries, and the relatively high interest rates following a prolonged period of loose monetary policy.<br />From the perspective of the potential for a global crisis, many factors remain, including changes in the economy and politics caused by long economic cycles, "bubbles" in financial and real estate markets, the quality of banks` credit portfolios, the level of management in the financial and corporate sectors, currency and geopolitical external shocks, etc.<br />Secondly, geopolitical tension, armed conflicts, sanctions wars, and the fragmentation of the global economy are seriously negatively impacting the economic development of many countries, regions, and the global economy as a whole. The wars in Ukraine and the Middle East have led to significant economic losses in several countries, increased instability in international financial and commodity markets, and dealt another blow to logistics chains in the supply of goods and services, which had not yet fully recovered from the COVID-19 pandemic. Many world leaders have repeatedly highlighted the risks to the global economy arising from these conflicts.<br /> Thirdly, there is a significant risk of the resurgence of trade wars between the U.S., China, and the EU. For instance, the economic program proposed by the winner of the U.S. presidential election, Donald Trump, involves "imposing tariffs of 10–20% on all imported goods, and up to 60% on those of Chinese origin." In this case, retaliatory measures from China, other countries, and state unions are highly likely, which would negatively affect global trade. The impact on national economies in the short-term perspective could also be negative. <br /> Fourthly, there are serious internal economic problems in several of the world`s largest countries. For example, the extremely high level of government debt in several developed countries or the worsening situation in China’s stock and housing markets. The problems in the banking sector of certain countries, which can lead to systemic banking crises, should also not be overlooked.<br /> Fifthly, against the backdrop of political and economic fragmentation, changes are taking place in the global financial system. While these changes are currently more declarative in nature, real transformations may occur in the medium term. Among such developments are initiatives to introduce alternative forms and methods of settlements, reserve currencies, and international financial institutions. These efforts are being undertaken by individual countries both at the national level and within international organizations, such as BRICS. <p style="text-align: justify;"><strong>Global economic growth has been generally weak and uneven</strong> <p style="text-align: justify;">Amid such risks and opportunities, the development of the global economy has remained sluggish and unbalanced, although certain countries and even entire regions have demonstrated strong socio-economic performance. <br /> Overall, global economic growth continues to slow down: from 3.6% in 2022 to 3.3% in 2023 and 3.2% in 2024 (with the 2024 figures and beyond based on IMF forecasts). In 2025, the IMF projects stable economic growth at 3.2%. However, growth forecasts for some low-income and developing countries have been significantly downgraded, in many cases due to escalating conflicts.<br /> According to the European Commission`s latest autumn forecast, global GDP is expected to grow by 3.2% in 2024 and by 3.3% in 2025–2026. The European Commission anticipates that this moderate but steady growth will be supported by the gradual easing of monetary policy. <br /> In the group of advanced economies, the IMF estimates that economic growth rates declined from 2.9% in 2022 to 1.7% in 2023 and 1.8% in 2024. In 2025, growth is also expected to remain at 1.8%. However, economic growth rates vary significantly across developed countries. Unemployment in advanced economies is projected to reach 4.6% in 2024, which is significantly lower than in previous years: for example, it stood at 6.6% in 2020 and 5.6% in 2021. These unemployment figures support the overall assessment of economic growth in developed countries.<br /> In the largest advanced economy—the United States, whose condition has a significant impact on the global economy—economic growth is expected to reach 2.8% in 2024 (compared to 2.9% in 2023). This is a strong figure, significantly exceeding the average growth rate of the U.S. economy between 2006 and 2015 (1.6%). In 2025, the IMF forecasts U.S. economic growth at 2.2%. At the same time, the economic program of U.S. President Donald Trump includes significant measures aimed at boosting economic growth. In addition to increasing tariffs on imports, the plan envisions extending the tax cuts introduced in 2017, reducing the corporate tax rate for manufacturers producing goods in the U.S. from 21% to 15%, eliminating taxes on tips and social benefits, and abolishing double taxation for U.S. citizens living abroad. <br /> However, potential trade wars could have a negative impact on the U.S. economy, especially in the short term, as they may lead to a decline in exports to China and other countries that implement retaliatory measures. At the same time, the U.S. recognizes the importance of U.S.-China economic relations for both countries and for the global economy as a whole.<br /> In 2024, according to the IMF forecast, economic growth in the Eurozone is expected to be 0.8%, slightly higher than the 2023 figure (0.4%) and in line with the average growth rate between 2006 and 2015. The modest growth rate is largely attributed to rising energy prices, trade wars, and sanctions. In this context, the ongoing wars in Ukraine and the Middle East are negatively impacting the economies of European countries, and their swift resolution could have a beneficial effect. In the largest European economy, Germany, a zero growth rate is expected in 2024 (after a 0.3% decline in 2023). The economies of the UK and France are forecast to grow by 1.1% in 2024, Italy by 0.7%, Spain by 2.9%, and the Netherlands by 0.6%. In 2024, the IMF anticipates a slight economic decline in Ireland, Austria, Finland, and Estonia.<br />In the Eurozone, the unemployment rate in 2024 is expected to be 6.5%, the lowest level in recent years.<br />The European Commission`s latest autumn forecast highlights that the EU economy, after a prolonged period of stagnation, is transitioning to moderate growth. However, new risks to the sustainability of this growth may arise from plans by the new U.S. administration to impose new tariffs on all imports from the EU. <br />According to the European Commission, U.S. protectionist measures could also lead to problems for the U.S. economy itself. The Commission forecasts that economic growth in the EU will be 0.9% in 2024 and 1.5% in 2025. <br />In Japan, GDP growth is expected to slow down to 0.3% in 2024 (compared to 1.7% in 2023).<br />Amid the conflicts in the Middle East, economic growth in Israel has significantly slowed down. While in 2021, the country’s economic growth reached 9.5%, and in 2022 it was 6.4%, in 2023 it slowed to 2%, and in 2024 it is expected to be just 0.7%. <br />In 2024, economic growth in developing countries and economies in transition is forecasted by the IMF to be 4.2%, which is similar to the 2023 figure (4.4%), but significantly lower than the average growth rate from 2006 to 2015 (5.6%). The IMF predicts economic growth in this group of countries to remain at 4.2% in 2025. Overall, the slowdown in economic growth in these countries is largely due to the consequences of armed conflicts, including those in Ukraine and the Middle East.<br /> In developing countries in Asia, the economic growth rate is expected to be 5.3% in 2024, slightly lower than in 2023 (5.7%). <br />In China, economic growth is projected to be 4.8% in 2024, down from 5.2% in 2023. The IMF forecasts further slowing of economic growth in China to 4.5% in 2025 and to 3.3% by 2029. For comparison, the average growth rate between 2006 and 2015 was 9.6%. <br />Possible increases in tariffs on Chinese imports to the U.S. could have an additional negative impact on Chinese exports, a key source of economic growth in the country. The situation in the Chinese real estate market is also facing difficulties. However, the Chinese government is implementing large-scale measures to support the economy, which may help mitigate the impact of various negative factors.<br />Trade wars and the fragmentation of the global economy along political lines could have a serious impact on both China`s economy and the global economy as a whole. The political situation surrounding Taiwan is also challenging, representing a potentially frozen regional global conflict, much like the potential conflict on the Korean Peninsula.<br />In India, economic growth is expected to reach 7% in 2024 (down from 8.2% in 2023). The IMF forecasts a slowdown in growth to 6.5% in 2025.<br />In European countries with emerging market economies, the GDP growth rate is expected to be 3.2% in 2024, which is roughly in line with the 2023 figure (3.3%). The IMF forecasts a decline in this rate to 2.2% in 2025. 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