New York: Europe and the Arabs
The United Nations Conference on Trade and Development (UNCTAD) has warned that the global economy is on the verge of recession, driven by escalating trade tensions and persistent uncertainty, with global growth expected to slow to 2.3% this year. This is according to a report released by UNCTAD on Wednesday, titled "Trade and Development Outlook 2025 - Under Pressure: Uncertainty Reshapes the Global Economic Prospects."
The report points to growing threats, including trade policy shocks, financial volatility, and rising uncertainty, that could derail the global outlook.
Rising trade tensions are impacting global trade, with UNCTAD noting that recent tariff measures are disrupting supply chains and undermining predictability. The report notes that "trade policy uncertainty has reached historic highs, and this is already translating into delayed investment decisions and reduced employment." UNCTAD said that the surge in global trade in late 2024 and early this year was driven in part by advance orders, and that this momentum is expected to fade, or even reverse, during the remainder of 2025 as the new tariffs take effect.
It emphasized that trade policy uncertainty is already affecting businesses and their long-term planning decisions.
While the report stated that the slowdown will affect all countries, UNCTAD expressed particular concern about developing countries, particularly the most vulnerable economies. The report warned that many low-income countries face a "perfect storm" of deteriorating external financial positions, unsustainable debt, and weak domestic growth.
The report pointed to the growth in trade among developing countries—South-South trade—as a source of resilience that provides a buffer against increased uncertainty. While it already represents about a third of global trade, it stated that "the potential for economic integration among countries of the South offers opportunities for many developing countries." With trade tensions escalating and growth slowing, UNCTAD warned of the risks of economic fragmentation and geo-economic confrontation. It urged countries to engage in dialogue and negotiation, along with enhanced policy coordination at the regional and global levels, leveraging existing trade and economic links. It stated that coordinated action "will be essential to restore confidence and maintain the development path."