The global economy in 2025 presents a mixed picture, with easing inflation in emerging markets contrasting persistent price pressures in developed nations, according to the latest Global Economy Update by CareEdge Global.
Higher inflation in developed economies such as the United States and the United Kingdom is being fuelled by elevated service costs, rising wages, and increasing debt. In contrast, emerging markets are seeing faster moderation in prices due to early monetary tightening and lower food inflation, allowing more flexibility for interest rate cuts.
The U.S. Federal Reserve recently cut its policy rate by 25 basis points to 4–4.25 per cent, signalling two more potential reductions this year. However, the European Central Bank, the Bank of England, and the Bank of Japan have kept rates steady. The Bank of Japan’s hawkish stance, combined with the Fed’s dovish tilt, has pressured the yen, weakening its carry trade appeal.
Global military spending rose sharply to USD 2.7 trillion in 2024, accounting for 2.5 per cent of global GDP — the fastest annual increase since the Cold War. Countries like Greece, France, and the U.S. face limited fiscal room for further defence expansion amid already high debt levels. India’s debt-to-GDP ratio remains high at 81 per cent, although consolidation is on track, projected to fall to 71 per cent by FY35.
In Asia, Australia’s economy grew 1.8 per cent year-on-year in the second quarter of 2025 — a two-year high — driven by a rebound in household consumption. Meanwhile, Indonesia’s fiscal position may weaken as unpopular policy measures widen its deficit to 2.68 per cent of GDP in FY26.
Africa’s largest economy, Nigeria, expanded 4.2 per cent in the second quarter — its fastest growth in four years — supported by a 20 per cent rebound in the oil sector. Ethiopia, however, faces mounting humanitarian and fiscal challenges amid ongoing conflict and climate stress. |
