Global Growth Slows in 2025 Amid Tensions, Inflation: WEF

As 2025 unfolds, the global economic outlook faces uncertainty driven by trade tensions, inflationary pressures, and slowing growth. While inflation and recession fears have eased among decision-makers, new challenges emerge from protectionist policies and geopolitical instability, according to the World Economic Forum.

According to the International Monetary Fund (IMF), global economic growth is projected to remain steady at 3.2% in both 2024 and 2025, below the long-term average of 3.8% recorded between 2000 and 2019. Rising tariffs and trade restrictions, particularly between the United States and major trading partners Canada and Mexico, may further weigh on global economic performance.

The incoming US administration has indicated plans to impose higher tariffs on imports from several countries, including China, Mexico, and Canada, sparking concerns about retaliatory measures and an increased shift toward global trade protectionism. Prolonged tariff escalation could lead to widespread trade restrictions, curbing global commerce and hindering growth prospects over the next two years.

During a morning press conference, President Claudia Sheinbaum stated her objective is to negotiate with the US government to eliminate tariffs before the deadline set by former President Donald Trump, which is tied to anti-drug trafficking efforts in Mexico. “Our aim is to secure significant agreements on this matter by Friday, Feb. 28. If necessary, I will request a direct call with the US President,” she said.

The Trump administration also has pressured Mexico to implement tariffs on Chinese imports as part of negotiations to avoid US duties on Mexican products. While Mexico has not committed to specific measures against China, both countries agreed to establish a bilateral working group to continue discussions on trade and tariff policies.

In Latin America, economic growth slowed to 2.2% in 2024, reflecting weaker consumption and external demand. The World Bank forecasts modest growth acceleration to 2.5% in 2025 and 2.6% in 2026, driven by Argentina’s recovery and easing inflation. However, restrictive monetary policies and fiscal consolidation are expected to constrain growth in key economies like Brazil and Mexico.

Mexico’s GDP growth is forecasted to decline from an estimated 1.6% in 2024 to 1% in 2025, according to Deloitte. The country faces multiple challenges, including fiscal consolidation, political uncertainty, and trade risks. Mexico’s fiscal deficit is expected to narrow from 6% of GDP in 2024 to 3.9% in 2025 due to a 1.9% reduction in public spending. Despite these measures, Moody’s and Fitch have downgraded Mexico’s sovereign debt outlook from stable to negative.

Inflation in Latin America is expected to moderate, with Mexico’s rate projected at 3.8% in 2025, within the central bank’s target range of 3% (+/-1%). Interest rates in Mexico are anticipated to gradually decrease, from 10% at the end of 2024 to 7.5% by late 2025. The Mexican peso is forecasted to trade around MX$20 per U.S. dollar, though volatility may arise due to constitutional reforms and changes in US-Mexico trade relations.

Several downside risks could affect economic performance in 2025, including persistent trade restrictions, inflationary pressures, and fiscal instability. Additionally, slower-than-expected recovery in China may dampen commodity exports, particularly for economies dependent on mining and agriculture.

Mexico will also navigate its first national judicial election on Jun. 1, 2025, alongside efforts to stabilize its economic relationship with the United States. Further trade restrictions under the US-Mexico-Canada Agreement (USMCA) could significantly impact exports, while tighter immigration policies may affect remittance flows.

The broader Latin American region is expected to exhibit mixed growth trends. Argentina is forecasted to rebound with a 4.8% expansion in 2025, while Brazil’s growth is projected to slow to 2.2%. Colombia is expected to achieve 3% growth, driven by private consumption and investment, while Chile’s economy is projected to expand by 2.2%, bolstered by green energy exports.

In Central America, growth is projected at 3.5%, supported by domestic consumption and remittances. The Caribbean is expected to experience robust growth of 4.9%, led by Guyana’s oil sector.