Year-end Reflections and Global Economic Outlook for 2025

Economic

Summary:

As 2024 comes to a close and we look ahead to 2025, Esther Lee Rosen, senior director of communications in the Global Economy and Development program, sat down with Vice President and Director Brahima S. Coulibaly to discuss the economic outlook moving forward.

Brahima S. Coulibaly (BSC): It is hard to talk about 2024 without placing it in the context of the past four years when the resilience of the global economy was tested by a string of overlapping shocks beginning with the COVID-19 pandemic, supply chain disruptions, high inflation, extreme weather events, and geopolitical conflicts, among others.

Viewed in this context, the global economy in 2024 performed better overall than many had feared around this time last year. Global growth likely stabilized this year, with a soft landing now in clear view. Declining inflation rates created space for central banks to begin lowering interest rates, easing financial conditions and providing some welcome relief to households, businesses, and even countries struggling with debt repayments.

ELR: What are some of the most memorable contributions the Global Economy and Development program has made in 2024?

BSC: The program has had another great year of numerous impactful research and engagements with the aim of addressing many of the challenges.

In the current environment of heightened geopolitical tensions, we have been very attentive to the issues of global economic cooperation and multilateralism. We convened a group of 40 scholars from over 25 institutions around the world to propose a reform agenda for a renewed international financial architecture. The resulting report provided valuable input to the United Nations’ Summit of the Future, and other global processes such as the T20/G20. The report offers innovative solutions including the reform of multilateral development banks, financing for climate and economic development, global cooperation on taxation, and global financial safety nets.

Scholars in our Global program also led the charge to advance climate mitigation and adaption—particularly from the perspective of climate finance at COP29 in Baku. Our scholars launched a very well-received and widely quoted landmark report calling for a significant increase in financing for climate change.

During the United Nations General Assembly (UNGA) week, scholars from the Center for Sustainable Development played a pivotal role in high-level international forums and drove impactful discussions on strengthening sustainable development and international financial systems. The center director—Senior Fellow John W. McArthur—delivered a TED-style talk at the U.N.’s SDG Moment in front of member states and civil society leaders, urging intensified global collaboration to meet the 2030 targets, He also moderated a panel featuring Haitian Prime Minister Garry Conille on advancing the Sustainable Development Goals (SDGs).

Our global education scholars continued their work in support of transforming local, national, and international education ecosystems. Their annual symposium, aimed at advancing solutions to the most pressing challenges in education, was hosted in partnership with Special Olympics International and the Global Partnership for Education and focused on inclusion of learners with intellectual and developmental disabilities. It was a very well attended symposium that convened ministers of education from several countries, as well as other policymakers and advocates.

ELR: What should we expect next year in terms of the global economic outlook?

BSC: My expectation is that the global economy will continue to improve at roughly the same pace as this year, but with a much larger uncertainty due to the myriad risks and challenges including those stemming from frictions among nations that can cause growth to slow significantly and possibly fall into recession.

Although global growth stabilized, it did so at a relatively low rate compared to the average over the past decade. The aggregate number for global growth also masks heterogeneity across regions and countries. Moreover, inequality has risen to uncomfortable levels. To boost growth, structural reforms and investments are needed to revive productivity growth, and public policies should aim to promote broadly shared prosperity. Despite reductions in inflation rates, the increase in the cost of living over the past four years has eroded purchasing power of households.

Sovereign debt levels remain uncomfortably elevated, and several countries, particularly in the developing world, are grappling with debt vulnerabilities. Risks from climate change loom large, with 2024 setting the record for the hottest year ever recorded. Extreme weather events, from floods in China and Europe to prolonged droughts in Africa and South America, and accelerated glacier loss further underscore the rapid pace of global warming. Importantly, geopolitical conflicts, including the great power competition between the U.S. and China and wars and conflicts between Russia and Ukraine and in the Middle East, risk deepening global supply chain vulnerabilities and global geoeconomic fragmentation. For example, the number of trade restrictions has tripled in recent years.

Finally, the year 2024 has been dubbed the “voters’ year” as at least 70 countries, representing nearly half of the world population, held national elections. Arguably the most consequential for the global economy and world affairs writ large is the outcome of the U.S. presidential elections during which former President Donald Trump staged a remarkable comeback. Some of the policy proposals that he campaigned on, if carried out, will accelerate protectionism, the fragmentation of the global economy, and accentuate frictions among nations with potentially large negative spillovers.

ELR: Do you have any parting thoughts that you would like to share?

BSC: Next year could mark the beginning of a tumultuous time in relations among nations with, potentially, large negative spillovers in important areas of global cooperation from trade to security cooperation.

I believe that we are in the twilight of the current world order and that a reconfiguration is underway. However, it is less clear what the new world order will look like. The next few years will accelerate reconfiguration of the world order and bring more clarity on its future. For our part, we will ramp up our effort, working with our partners, to propose ideas and solutions to ensure that global economic cooperation is at its best for the benefit of all nations

My best wishes to all our partners for a cheerful holiday season and happy new year 2025.

To stay updated on all economic events of today, please check out our Economic calendar

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Year-end Reflections and Global Economic Outlook for 2025

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