Chapter 1.1Global Outlook

The global economy in 2025 presents a complex, sometimes confusing, but at the same time resilient to shocks in the system. The economies around the world are grappling with geopolitical and global trade tensions. In addition to these are climate disruptions, stagnation of demand for goods and inflationary pressures. According to the IMF, the global GDP in 2025 is expected to be in the range of 3.3%. The World Bank has echoed concerns about the medium-term growth prospects due to high interest rates, disruption in supply chain and deglobalization trends.

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Inclusive Growth Through Resilient Microfinance Nanaiah Kalengada

1.1 Global Outlook

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he global economy in 2025 presents a complex, sometimes confusing, but at the same time resilient to shocks in the system. The economies around the world are grappling with geopolitical and global trade tensions. In addition to these are climate disruptions, stagnation of demand for goods and inflationary pressures. According to the IMF, the global GDP in 2025 is expected to be in the range of 3.3%. The World Bank has echoed concerns about the medium-term growth prospects due to high interest rates, disruption in supply chain and deglobalization trends.

The significant shift has been the tariff announcement by the US in April’25, which introduced a blanket tariff and also additional country-specific levies. Along with geopolitical tension, this created confusion among investors and created uncertainties in commodity prices. In the midst of this, the Financial Stability Institute of the Bank for International Settlements has raised concerns about the adequacy of existing liquidity requirements with banks and the impact of climate change on reinsurance markets. In their May’25 report on “Rethinking banks’ Liquidity Requirements” FSI has suggested revisiting current frameworks to better address emerging risks.

The IMF, too, in its April 2025 Global Financial Stability report titled “Enhancing Resilience amid Uncertainty” identifies elevated asset valuations, high financial leverage and sovereign debt concerns as key global financial risks. Another factor that is shaping the global economic environment is the volatility in crude oil prices, which in the recent past has moved between $74 a barrel to $58.29 a barrel due to factors such as an increase in production by OPEC members and also a projected slowdown in global oil demand. However, the markets around the world at some point give an impression of having factored in these uncertainties and learnt to navigate through global tensions.

Despite turbulence in the global economy, India continues to post robust GDP growth, sustained by strong domestic demand—outpacing levels that many nations struggle to match. Amid global challenges, India has also seized opportunities such as benefiting from lower oil prices—especially significant given that the country imports nearly 80% of its crude oil requirements and positioning itself as an attractive base for global manufacturing.