World economic growth to stay subdued at 2.8%, India to grow at 6.6% in 2025: UN report

The global economic growth is expected to remain stable but subdued at 2.8% in 2025 and 2.9% in 2026, slower than the 2010–2019 average of 3.2%, the United Nations said on Thursday.

In a report titled ‘World Economic Situation and Prospects 2025’, the UN said that weakening labour market conditions, a potential increase in protectionist policies, and growing climate risks will weigh on the near-term growth outlook.

“While continued disinflation and monetary easing in a large number of countries are expected to boost aggregate demand, ongoing conflicts and rising geopolitical tensions could exacerbate challenges on the supply side,” it said.

The near-term outlook for South Asia is expected to remain robust, with growth projected at 5.7 per cent in 2025 and 6.0 per cent in 2026, driven by strong performance in India as well as economic recovery in a few other economies.

India will continue to be the bright spot with 6.6% economic growth expected in 2025, largely driven by solid private consumption and investment growth. Despite the developing countries grappling with high youth unemployment, employment indicators in India have remained robust, according to the report.

China faces a gradual slowdown, with growth projected at 4.9% in 2024 and 4.8% in 2025. Public investments and exports are expected to support the economy, but weak consumption and lingering property sector issues remain headwinds. The Chinese authorities have stepped up policy support to lift property markets, address local government debt challenges, and boost domestic demand.

China’s “shrinking population and rising trade and technology tensions, if unaddressed, could undermine medium-term growth prospects,” the report says.

European growth this year is projected to gradually pick up after a weaker than expected performance in 2024. Japan is poised to pick up from periods of near-recession and recession.

The outlook for many low-income countries remains bleak due to structural challenges, including high debt, weak investment, and slow productivity growth.

While downside risks to global growth are less severe than in 2023, the UN report suggests many developing countries are still experiencing prolonged scarring effects from the pandemic and other shocks of the past few years.