Global economic growth will slow to 2.6 per cent in 2025, down from 2.9 per cent in 2024, as global trade and investment face growing pressure from financial volatility and geopolitical uncertainty, according to a new report by the UN Trade and Development body.
Shifts in financial markets now move global trade almost as strongly as actual economic activity, shaping prospects for developing countries in particular.
"Trade is not just a chain of suppliers. It is also a chain of credit lines, payment systems, currency markets and capital flows," said Rebeca Grynspan, UNCTAD Secretary-General.
Developing economies are growing faster than advanced ones, but high borrowing costs, financial market volatility, and climate risks are limiting their ability to invest and sustain growth, the report highlights.
Climate vulnerability adds to financial pressures. Countries repeatedly exposed to extreme weather now pay an estimated $20 billion more each year in interest because lenders perceive them as riskier, according to UNCTAD.
At the same time, the U.S. dollar remains central to global finance, even as some diversification takes place.
Its share of cross-border payments through the SWIFT electronic transfer system has risen sharply - from 39 per cent to about 50 per cent in five years - and the United States continues to dominate global stock and bond markets.
While this can bring some stability during financial shocks, it also means developing countries are ever more exposed to U.S. financial cycles that they have little power to shape, UNCTAD said in a press release.
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December 26, 2025 08:42 ET Third quarter economic growth data from some major economies including the U.S. were the main news in this holiday shortened week. GDP growth and industrial production data from the U.S. helped to boost morale, while the consumer confidence survey results were less upbeat. In Europe, the quarterly economic growth data from the U.K. drew attention, while the minutes of the Australian central bank’s latest policy session was in focus in Asia.