The Fading Pulse of Global Growth
Over the past decade, the world seems to have lost its economic momentum. After the pandemic waves, the energy disruptions caused by the Russia–Ukraine war, and sharp geopolitical shifts, the global economy is now facing a structural slowdown. Growth that briefly rebounded in 2023–2024 is once again losing steam. The World Bank and OECD project that the global economy will expand by only 2.5–2.8 percent in 2025, well below the pre-pandemic average of around 3.5 percent. The question now is clear: why does the engine of global growth appear to be running out of power?
Fragmentation of the Global Economy
The first factor is the deterioration of international trade relations. The United States has reimposed tariffs on China and several other countries, followed by protectionist measures in Europe, India, and many developing nations. This trend—often described as de-globalization or geo-economic fragmentation—has created uncertainty in supply chains and pushed up global logistics costs.
As a result, cross-border investment flows have slowed dramatically. UNCTAD data show that global FDI fell by more than 7 percent in 2024, particularly in mid-tech manufacturing sectors that serve as the backbone of employment in developing economies. If this trend continues, the world may move toward a divided trade landscape—between Western blocs, China and its allies, and a set of non-aligned nations trying to balance between them.
Shrinking Fiscal Space
The second factor is the explosion of public debt following the COVID-19 pandemic. To cushion the crisis, nearly every government unleashed massive fiscal stimulus. Now, the bills are coming due. According to the World Bank, the global public debt-to-GDP ratio has reached 93 percent, the highest level in four decades.
Consequently, fiscal space to drive growth has become increasingly constrained. Developing countries that once relied on cheap loans now face high interest rates and a strong dollar. Several nations in Africa and Latin America are already showing signs of a renewed debt crisis. As public spending tightens and debt servicing eats into budgets, development expenditure inevitably slows.
Geopolitical Uncertainty
Meanwhile, global private investment has also weakened. Major corporations are holding back expansion due to rising geopolitical uncertainty—from conflicts in the Middle East and tensions in the South China Sea to heated elections in the United States and Europe. The Bloomberg Global Business Confidence Index has shown declining investment sentiment since the second quarter of 2024.
At the same time, new technologies such as AI and automation have yet to deliver substantial boosts to global productivity. Many firms remain in the experimental phase, and technology investment has not fully reached labor-intensive sectors. The result is a paradox: the world is rich in innovation but poor in real investment momentum.
Social Consequences
This global slowdown carries broad social consequences. Real wage growth in many countries has stagnated, youth unemployment is rising, and income inequality continues to widen. Developing nations are hit hardest, given their fragile industrial bases and heavy dependence on exports.
Ironically, in the midst of this, stock markets continue to rise—because capital flows into financial assets rather than productive sectors. This is one of the hallmarks of modern economic financialization: money circulates in virtual spaces more than it creates real jobs on the ground.
Rebuilding Trust
The way out of this global stagnation is far from simple. The world needs to rebuild trust—between nations, and between the public and private sectors. Reforming the multilateral trading system is crucial to restore efficiency and stability in supply chains.
In addition, investment in renewable energy, digital infrastructure, and education will be key. If countries can channel their limited resources into productive sectors while curbing fiscal waste, the possibility of recovery could re-emerge. The world does not lack capital—it lacks direction and the courage to take long-term risks.
Conclusion
Today’s global economic slowdown is not merely another cycle; it is a reflection of a changing era. The world is moving toward a new order—more fragmented, more cautious, and fraught with risk. In such a landscape, nations that can balance domestic interests with global openness will emerge as the new winners.
The global economy has not stopped—it is, in a sense, behaving normally as a cycle—because it is merely trying to find its way forward once again.
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