Geopolitical Uncertainties Cloud World Economic Prospects, UN Report Says

Press Briefing on Launch of 2025 World Economic Situation and Prospects Report at the United Nations Headquarters. Credit: UN Photo/Loey Felipe

By Oritro Karim
UNITED NATIONS, Jan 10 2025 (IPS)

In the past few years, the world economy has made significant strides in mitigating inflation, unemployment, and poverty. Despite this, global growth has yet to regain its pace from before the pandemic.

This can be attributed to a host of issues that are plaguing the world, including climate shocks, armed conflicts and rising geopolitical tensions. These issues have disproportionately adverse effects on developing nations. It is imperative to come up with a solution that advances economic growth for all in order to get back on track with the Sustainable Development Goals (SDGs).

“Several structural factors, including high depth burdens, limited fiscal space, weak investments, and low productivity growth, continue to hinder the economic prospects for developing countries. Climate change and the geopolitical tensions pose additional risks,” said Under-Secretary-General for Economic and Social Affairs (DESA) Li Junhua.

On January 9, the United Nations (UN) released a report titled World Economic Prospects 2025 that detailed the global economic situation as well as measures that can be taken to alleviate economic distress. According to the report, the world economy has remained relatively “resilient” over the course of 2024, despite extensive occurrences of climate-driven disasters and armed conflicts. Economic development is predicted to increase by 2.9 percent in 2025, which is virtually unchanged from 2024’s rate. This is still far below the rate of average economic growth recorded prior to 2020.

Major world economies, such as the United States, the European Union, and Japan, have experienced gradual economic recoveries in the past year. On the contrary, developing nations continue to struggle with high rates of youth unemployment, poverty, and inflation, all contributing to lower rates of economic growth.

Demographic pressures and increasingly high labour market demands have created bouts of unemployment among younger generations in developing nations. According to figures from the report, rates of youth unemployment remain a pressing concern in Western Asia, North Africa, South Asia, Latin America, and the Caribbean.

Approximately 20 percent of young people in these areas are unemployed. High numbers of these populations rely on informal employment, which often yields low pay and few to no benefits. Due to limited fiscal space in these national economies, there have been lower rates of job creation and young people struggle to enter labour markets.

Most young workers still lack social protection and remain in temporary jobs that make it hard for them to get ahead as independent adults. Decent work is a ticket to a better future for young people. And a passport for social justice, inclusion and peace. The time to create the opportunities for a brighter future is now,” said Sara Elder, the International Labour Organization’s (ILO) Head of Employment Analyses and Public Policies.

ILO Director-General Gilbert Houngbo adds that “none of us can look forward to a stable future when millions of young people around the world do not have decent work and, as a result, are feeling insecure and unable to build a better life for themselves and their families.”

Although global rates of inflation have trended downward in recent years, developing countries continue to face high levels of inflation in their economies. According to the Director of Economic Analysis and Policy Division at the UN Department of Economic and Social Affairs, Shantanu Mukherjee, the global rates of inflation were estimated to be six percent in 2024 and projected at 5.4 percent in 2025. These numbers are 1.5 times those for developing nations.

“That’s a sign of how severe the cost of living crisis is for most of us outside of this room. In 2024, if you look at the amount of public money that was used to service debt, the median country allocated 11.1 percent of its revenue. That’s more than 4 times the amount for the median developing country. Even among developing countries, there are variations with the least developing countries tending to be systematically worse in relative terms,” said Mukherjee.

Additionally, although global rates of poverty have declined significantly, extreme levels persist in Africa. Climate shocks, armed conflict, and the COVID-19 pandemic have all caused widespread economic issues around the world, with Africa bearing the worst impacts. According to figures from the report, numbers of Africans living below the poverty line have trended upward in recent years.

Furthermore, in the world’s most conflict-affected states, such as the Gaza Strip, economies have seen considerable declines, with widespread poverty, unemployment, food insecurity, and limited access to basic services becoming increasingly regular. According to the UN Development Programme (UNDP), due to extensive warfare and damage to critical infrastructures in Gaza, the local economy has been decimated and approximately 69 years of economic progress have been erased.

To effectively foster global economic growth, it is crucial to tackle the climate crisis. According to the World Economic Forum, it is estimated that greenhouse gas emissions and extreme weather events will cut average global incomes by 20 percent. Additionally, according to the United Nations Environmental Programme (UNEP), if yearly emissions stay the same, countries will need to spend at least 387 billion a year by 2030 to combat climate-related damages.

Global cooperation is also essential in boosting global economic growth, especially for developing nations. To build a more sustainable future with lower carbon emissions, technologies must be set in place that foster the use of renewable energy sources. In the UN DESA report, it is stated that a new commitment was created by a group of developed countries to mobilize a fund of 300 billion dollars annually by 2035 to support the implementation of renewable energy infrastructures.

IPS UN Bureau