The United Nations Department of Economic and Social Affairs (UN DESA) has cautioned that the global economy is teetering on a fragile turning point, as rising trade tensions and deepening policy uncertainty put mounting pressure on already vulnerable economies.

In a report released on 15th of May 2025, the UN highlighted how tariffs and shifting trade dynamics are fuelling inflationary pressures across the world. These developments, it said, are particularly detrimental to trade-reliant nations, where global supply chain disruptions and surging production costs are undermining investment and growth prospects.

According to UN DESA, the current slowdown is not isolated to one region—it is widespread, affecting both developed and developing economies alike.

Global Slowdown Gathers Pace

In the United States, economic growth is expected to slow “significantly” as businesses and consumers contend with elevated tariffs and persistent policy uncertainty. Private investment is likely to dip, while consumer spending—the traditional engine of American growth—faces headwinds.

Meanwhile, several key developing economies are also seeing downgrades in their outlooks. Brazil and Mexico, for instance, are contending with falling forecasts, while China’s growth is projected to slow to 4.6 per cent in 2025, down from 5.0 per cent the previous year. The Chinese slowdown reflects a mix of waning consumer confidence, weakening export-led manufacturing, and continuing turmoil in the property market.

Inflation Still a Global Concern

Despite a modest easing of global headline inflation between 2023 and 2024, the report warns that inflation levels remain troubling. By early 2025, two-thirds of countries had inflation rates exceeding their pre-pandemic averages. In over 20 developing economies, inflation had climbed into double-digit territory.

Food prices remain a particular concern. In Africa and parts of South and Western Asia, food inflation averaged more than six per cent—posing a direct threat to low-income households already struggling with rising living costs.

UN DESA identified trade barriers and climate-related shocks as key drivers behind stubborn inflation. These risks, the report argues, underscore the urgent need for coordinated international policy action to stabilise prices and protect vulnerable populations.

Mounting Pressure on Developing Economies

As central banks worldwide wrestle with the dual challenge of containing inflation while supporting slowing economies, the ability of many governments—especially in the Global South—to respond effectively is constrained.

“The tariff shock risks hitting vulnerable developing countries hard,” said Li Junhua, UN Under-Secretary-General for Economic and Social Affairs.

With limited fiscal space, many developing countries are struggling to deploy the resources needed to counteract economic headwinds. The report warns that this could jeopardise efforts to generate employment, reduce poverty, and address structural inequalities.

Call for Global Coordination

The UN’s message is clear: the current economic landscape demands more than reactive measures. It requires strategic, cooperative policymaking that addresses both short-term shocks and long-term structural vulnerabilities.

As the global economy braces for further uncertainty, the call for inclusive, multilateral solutions has rarely felt more urgent.

Source: Punch