The Cabinet Office published "World Economic Trends 2025 I," Chapter 1, Section 4, analyzing the global economic outlook and six major risk factors based on the OECD June 2025 forecast.
1. Global Economic Outlook
According to OECD projections, the global real GDP growth rate is expected to decline from 3.3% in 2024 to 2.9% in 2025 (a decrease of 0.4 percentage points), remaining flat at 2.9% in 2026. This sub-3% growth represents the first occurrence since the COVID-19 pandemic expansion in 2020 (-3.0%) and the lowest level since 2019 (2.9%) when U.S.-China trade tensions escalated under the first Trump administration.
By major countries and regions, the United States shows the most significant decline from 2.8% in 2024 to 1.6% in 2025 (a substantial decrease of 1.2 percentage points), primarily due to substantial tariff rate increases, retaliatory measures by trading partners, and policy uncertainty. China is projected to slow from 5.0% in 2024 to 4.7% in 2025 (a decrease of 0.3 percentage points), falling below the government target of "around 5%," with the effects of fiscal expansion limited due to the impact of mutual substantial tariff rate increases between the U.S. and China.
In contrast, the Eurozone shows relative resilience, rising slightly from 0.8% in 2024 to 1.0% in 2025 (an increase of 0.2 percentage points), supported by continued investment promotion policies under the recovery fund "Next Generation EU." Germany improves from -0.2% in 2024 to 0.4% in 2025 (an improvement of 0.6 percentage points), with the effects of infrastructure investment and defense spending expansion expected to materialize fully around 2026. The United Kingdom remains relatively stable, declining slightly from 1.2% in 2024 to 1.1% in 2025 (a decrease of 0.1 percentage points).
2. Forward-looking Risk Factors
First, U.S. policy developments including trade policy. The second Trump administration has implemented country-specific additional tariffs on imports from China, Canada, and Mexico, and product-specific additional tariffs on steel, aluminum, and automotive parts, introducing "reciprocal tariffs." The July U.S.-Japan agreement applies a base tariff rate of 15% to U.S. imports from Japan, with automotive and parts tariff rates at 15%, and Japan committed to investing $550 billion in the United States. The U.S.-EU agreement includes tariff rates of 15%, with the EU committing to $600 billion in investment.
Second, changes in the European security environment. The United States announced a temporary suspension of military aid to Ukraine in March 2025, and the EU formulated a "European Rearmament Plan" with a new lending facility of up to €150 billion. Germany amended its Basic Law in March 2025 to position defense spending outside the debt brake.
Third, the continuation of high interest rate levels. Policy rates stand at 2.00% in the Eurozone (down from a peak of 4.00% in June 2025), 4.25-4.50% in the United States (down from a peak of 5.25-5.50%), and 4.25% in the United Kingdom (down from a peak of 5.25%), with the U.S. and UK remaining above neutral rates. Long-term interest rates remain elevated at around 4.2% in the United States and 4.5% in the United Kingdom, posing risks of suppressed fixed asset investment.
Fourth, volatility in financial capital markets; fifth, continued stagnation in China's real estate market (structural issues due to population decline); and sixth, situations in the Middle East and Ukraine (increased transportation costs due to Suez Canal avoidance).
In international commodity markets, crude oil prices (WTI) have fluctuated from $72/barrel to over $75 due to policy developments and geopolitical risks, while gold prices have reached historic highs around $3,400/troy ounce due to policy uncertainty. The global economy is expected to experience significant growth rate declines due to tariff measures and policy uncertainty.