A United Nations report expects Pakistan, a significant South Asian economy, to experience moderate growth and economic stabilization in 2025 after a contraction period, with its GDP projected to grow by 2.3%.
The report, ‘the UN World Economic Situation and Prospects 2025’, stated that easing inflation has enabled the majority of the South Asian region’s central banks to begin or continue monetary easing during 2025.
IMF-Supported Fiscal Reforms in South Asia
Meanwhile, the International Monetary Fund (IMF) will require the Pakistani, Bangladeshi, and Sri Lankan governments to pursue fiscal consolidation and economic reforms under its supported programmes.
The report stated that South Asia’s near-term prospects will remain strong, with growth projected at 5.7% in 2025 and 6.0% in 2026, driven by strong Indian performance and recovery in a few other economies, including Bhutan, Nepal, and Sri Lanka.
The report indicated the international economy stands at a delicate point, characterized by increasing trade tensions and rising policy uncertainty. The recent jump in tariffs — propelling the effective US tariff rate sharply higher — threatens to increase production costs, cloud global supply chains and increase financial turbulence.
Global GDP growth is now forecast at just 2.4% in 2025, down from 2.9% in 2024 and 0.4 percentage points below the January 2025 projection.
Slower global growth, elevated inflationary pressures and weakening global trade — including a projected halving of trade growth from 3.3% in 2024 to 1.6% in 2025 — jeopardise progress toward the Sustainable Development Goals.
Economic Slowdown Across Developed and Developing Countries
The slowdown affects both developed and developing economies broadly. Analysts expect the United States’ growth to slow sharply from 2.8% in 2024 to 1.6% in 2025, as increased tariffs and policy uncertainty discourage private investment and consumption. Economists forecast that weaker net trade and higher trade barriers will keep the European Union’s GDP growth steady at 1.0% in 2025, the same as in 2024.
Analysts expect China’s expansion to moderate to 4.6% this year due to restrained consumer spending, disruptions in export-led manufacturing, and persistent property sector headwinds.
A number of other large developing economies, such as Brazil, Mexico and South Africa, are also bracing for growth downgrades with declining trade, softening investment and decreasing commodity prices.
India, with its 2025 growth estimate reduced to 6.3%, continues to rank among the world’s fastest-growing large economies.
The tariff shock stands to hit vulnerable developing countries hard, to slow growth, reduce export revenues, and compound debt issues, particularly as these economies are already finding it difficult to make the investments necessary for long-term, sustainable development,” United Nations Under-Secretary-General for Economic and Social Affairs Li Junhua said.
Although headline inflation in the world slowed from 5.7% in 2023 to 4.0% in 2024, price pressures are still stubbornly high in most economies. By early 2025, inflation was above pre-pandemic levels in two-thirds of nations, with more than 20 emerging economies experiencing double-digit inflation.
Food price inflation, at over 6% on average, remains to disproportionately affect low-income families, especially in Africa, South Asia and Western Asia. Rising trade barriers and climate shocks further exacerbate inflation risks, emphasizing the necessity for policy coordination — in the form of credible monetary frameworks, focused fiscal assistance and long-term policy approaches — to stabilize prices and protect the most vulnerable.
Challenges for Developing and Least Developed Countries
Slowing global trends and geopolitical disintegration erode development gains. For most developing nations, this dark economic picture dashes hopes for job creation, poverty reduction, and equity.
Falling export earnings, rising financial conditions, and reduced official development assistance flows will further compress fiscal space and increase the risk of debt distress for the least developed countries, where growth is projected to decelerate from 4.5% in 2024 to 4.1% in 2025.
