Executive Summary

Updated 07 August 2025:  As of August 2025, the global economy continues to tread a narrow path between cautious optimism and persistent uncertainty. The OECD maintains its forecast for global GDP growth to decline from 3.3% in 2024 to 2.9% in both 2025 and 2026, with the IMF reinforcing the need for long-term structural reform and fiscal resilience to restore confidence.

Capital mobility remains strong, underpinned by ongoing supply chain reorientation and policy stability in some regions. Yet the reintroduction of sweeping US tariffs on 1 August has reinserted friction into global trade flows. While bilateral arrangements with the EU and Japan have prevented escalation, they offer limited predictability highlighting a trend towards managed competition rather than multilateral consensus.

Inflation remains stable in the US (2.7%) and the euro area (2.0%), while the UK has seen an uptick to 3.6%. China recorded mild deflation (-0.1%), with underlying weakness in consumer demand. Bond and equity markets showed upward momentum, though investor sentiment remains sensitive to policy shifts. Labour markets are stable overall but showing early signs of softening across Europe and Asia.

Despite the temporary easing of some trade tensions, the global system is transitioning into a structurally more fragmented environment. Business leaders will need to watch for ripple effects on investment flows, inflation patterns, and strategic risk calculations in the months ahead.

Signals to Watch

  • US-China tariff pause expiry mid-August may trigger renewed volatility in trade and capital markets.
  • Central bank synchronisation is slipping, with diverging policy signals emerging between developed and emerging markets.
  • Greenfield FDI momentum suggests long-term strategic repositioning continues despite short-term uncertainty.
  • Labour markets softening in Europe and Asia could signal early demand-side pressure ahead of Q4.

Global Economy

In this section, we analyse global economic conditions an using data from the OECD, IMF and World Bank.

GDP Growth 


Source: Original Ibec Global chart based on the data from: International Monetary Fund. (July 2025). OECD Economic Outlook, Volume 2025 Issue 1: Preliminary version, World Bank. 2025. Global Economic Prospects, June 2025.  

The bottom line:
​

Global growth is projected to slow to 2.9% in 2025 and 2026, with the steepest declines expected in the US, China, Canada and Mexico. The IMF warns that without renewed fiscal buffers and structural reform, even modest projections may come under pressure. Supply chain diversification is helping capital resilience, but not yet offsetting trade fragmentation. The US is forecast to slow to 1.6% growth, while euro area and UK remain at 1% and 1.3% respectively. China’s growth is expected at 4.7%, reflecting its reliance on state-led production amid weak domestic consumption. The return of US tariffs introduces further downside risk to synchronised global recovery.

FDI flows

The bottom line:
​

FDI flows remained uneven in early 2025, shaped by political instability and diverging economic signals. The OECD reports subdued FDI in the EU, while the US holds its position despite slowing inflows. UK investment improved with macro stability, while China saw a continued retreat amid concerns over market access and regulatory opacity.



UNCTAD data shows global greenfield announcements surged to $1.3 trillion highlighting confidence in strategic long-term repositioning, particularly in Southeast Asia. The macro environment increasingly favours jurisdictions offering regulatory clarity and trade predictability, now in scarce supply amid new US trade actions.


Source: Original Ibec Global chart based on OECD data

Source: Original Ibec Global chart based on OECD data


Source: Original Ibec Global chart based on UNCTAD data.


Source: Original Ibec Global chart based on UNCTAD data.

Financial Conditions

In this section, we analyse global financial conditions based on monetary reports by central banks, in addition to stock prices of the Euro Stoxx 50, FTSE 100, S&P 500 and CSI 300.

Interest Rates & Inflation

The bottom line:


Central banks, with the exception of the Bank of England, held policy rates steady through July and early August, but signs of further future divergence are emerging. The ECB retained rates (main refinancing at 2.15%) to moderate wage-driven inflation. The Federal Reserve held at 4.25–4.5%, weighing inflation risks against weaker forward demand. The People’s Bank of China maintained rates at 3.0%, balancing growth targets with capital flight risks. Meanwhile, the Bank of England lowered rates to 4% to primarily stimulate a stagnating labour market. The August US tariff reintroduction complicates the inflation outlook and may force central banks to reassess in Q4. Divergence in rate paths could amplify FX volatility and capital flow pressures.



Inflation remains relatively contained in the US (2.7%) and euro area (2.0%), while UK inflation has risen sharply to 3.6% amid persistent price pressures. China’s -0.1% CPI decline reflects depressed consumer demand, even as production stabilises. Looking forward, inflation paths may become more volatile as trade frictions feed into cost structures and currency dynamics. Central banks must now balance domestic conditions against imported inflation and global supply uncertainty signalling more cautious forward guidance into 2026. 


Source: Ibec Global original chart based on the latest monetary policy reports by the European Central Bank (MRO rate), Bank of England, the Federal Reserve, and the People's Bank of China.

Interest Rates (as of early August 2025) 

Source: Ibec Global original chart based on the Consumer Price Index Summary of the US Bureau of Labor Statistics; Eurostat; UK’s Office for National Statistics; China National Bureau of Statistics, Consumer Price Index.

Financial Markets

The bottom line:


Equity indices rose through July and early August, supported by strong earnings and temporary trade stabilisation. The S&P 500 reached 6,362.90, buoyed by technology and capital inflows. Euro Stoxx 50 and FTSE 100 also gained on improved sentiment and steady monetary policy. The CSI 300 rose modestly to 4,075.59, amid hopes of trade normalisation. Still, equities remain highly sensitive to geopolitical developments especially tariff escalation, central bank divergence and FX instability.

Bond Markets

The bottom line:
​

Bond yields moved upward across major markets, reflecting cautious optimism and monetary stability. US yields climbed modestly on stronger-than-expected growth, while Eurozone and UK yields rose in response to firm inflation and fiscal concerns. In China, yields edged up as investors priced in modest supply-side gains. Global bond markets are adjusting not only to central bank policy but also to strategic political shifts indicating that sovereign risk premiums may increasingly reflect geopolitics, not just macro fundamentals.

Source: Ibec Global original chart based on Germany 10Y Bond; UK 10Y Bond; US 10Y Bond and China 10Y Bond.; Note: The German 10-year Bund is considered the Eurozone’s benchmark bond, valued for its strong role in ECB policy decisions as a key indicator of market conditions.

Trade

In this section, we examine the value of exports using data from the World Trade Organisation.

The bottom line:

The 1 August announcement of new US tariffs marks a return to unilateral trade action. Deals with the EU and Japan establishing 15% reciprocal tariffs have temporarily avoided escalation, but provide little clarity on broader trade direction. With the US-China tariff pause due to expire mid-August, global supply chains face renewed disruption risk. Canada, without a deal, anticipates rising input costs. Despite short-term de-escalation, the WTO and IMF caution that long-term risks to global trade architecture remain unresolved.

Trade System at an inflection point:

The global trade system is shifting from rules-based coordination to managed bilateralism. The August US tariffs underscore a pivot away from multilateralism. Even “deals” reflect tactical pauses, not durable frameworks. For globally integrated businesses, the key trend is not escalation, but persistent uncertainty. The result is a world of fragmented predictability, where operational planning hinges increasingly on political risk, not just market fundamentals. 

Source: Ibec Global original chart based on the data from the April 2025 WTO Global Trade Outlook and Statistics.

Labour Market

In this section, we examine unemployment rates in the Eurozone, UK, US and China using data from the US Bureau of Labour Statistics, Eurostat, UK's Office for National Statistics and the National Bureau of Statistics in China.

Unemployment Rates


Source: Ibec Global original chart based on the data from the US Bureau of Labor Statistics; Eurostat; UK’s Office for National Statistics; National Bureau of Statistics of China.


The bottom line:
​

Labour markets remain generally stable, but pressures are emerging. US unemployment declined to 4.1% amid steady hiring. Eurozone unemployment rose to 6.3% as service sectors pull back, while the UK rate climbed to 4.7% amid subdued business confidence. China’s 5.2% urban unemployment rate reflects sectoral imbalances and weak household demand. While not yet alarming, the softening trend may indicate early cracks in consumption and labour-intensive industries, warranting closer monitoring into Q4.

Productivity


The bottom line:
​

Productivity trends continue to show notable divergence. The US remains the global leader, with output per hour worked rising to 81.8 USD, driven by advances in automation and sustained investment in workforce skills. The Eurozone improved to 71.32 USD, reflecting modest gains but still constrained by structural inefficiencies and uneven progress among member states. In the UK, productivity grew slightly to 69.49 USD, underscoring persistent stagnation tied to limited investment and economic uncertainty. 
Meanwhile, China’s increase to 19.77 USD highlights incremental progress fuelled by industrial upgrades, though structural challenges like an aging workforce and capital inefficiencies continue to weigh on long-term potential. These patterns underscore the uneven pace of global productivity growth, shaped by technological advancement and regional disparities.​

Source: Ibec Global original chart based on the estimates from the International Labour Organisation (ILO).

CEO Sentiment & Strategic Priorities

In this section, we analyse CEO sentiment and outlook by aggregating multiple globally-renowned sources including from KPMG, EY and PwC and Deloitte & Fortune.

The bottom line:

CEO outlooks for 2025 reflect strategic caution amid rising complexity. While there is still measured optimism—particularly around AI and digital transformation—persistent macroeconomic volatility, trade tensions, and geopolitical instability are reshaping priorities. Generative and agentic AI adoption is accelerating, but leaders remain realistic about short-term revenue impact, focusing instead on operational efficiency, responsible use, and workforce reskilling.

Sustainability is increasingly tied to business performance, with ESG efforts aligning closely to digital goals. However, progress is inconsistent, and stakeholder demand for measurable outcomes is intensifying. Meanwhile, tariffs and supply chain disruption are pushing CEOs to reallocate capital, build resilience, and adopt scenario-based planning. In short, 2025 will be defined by targeted execution—success will favour those who act decisively, invest selectively, and adapt faster than the uncertainty around them.


Overall Sentiment​

KPMG

74%

of global CEOs express confidence in the global economy over the next 3 years, reflecting improved sentiment from 2023 (73%).

EY

67%

of CEOs expect revenue growth, but 33% foresee challenges ahead due to macroeconomic volatility.

PwC

52%

of CEOs expect revenue growth, with focus shifting to resilience rather than expansion.

Deloitte & Fortune

60%

of CEOs are optimistic about their own company’s performance, down from 84% in Fall 2024. Meanwhile, 58% express pessimism about the global economy over the next 12 months, a sharp rise from 18%.


Key highlight​

KPMG

79%

of CEOs believe tightening monetary policies and persistent cost-of-living pressures will challenge organisational growth, yet 82% aim to sustain long-term investments in talent and technology.

EY

92%

of CEOs place digital transformation as the cornerstone of their 2024 agenda, focusing on AI and workforce upskilling.

PwC

49%

of CEOs worry their organisations may not remain viable in 10 years unless immediate structural changes are made.

Deloitte & Fortune

71%

of CEOs plan to adapt their supply chains in response to shifting trade policies. Cost management strategies include cutting costs (42%) and limiting price hikes (only 28%).


Sustainability​

KPMG

72%

of global CEOs have embedded
ESG into their strategies, but 65%
express concern over stakeholder scrutiny and pressure to deliver measurable outcomes.

EY

CEOs emphasise alignment of ESG initiatives with digital transformation strategies to meet stakeholder demands.

PwC

68%

of CEOs report decarbonisation progress, with energy efficiency leading the way.

Deloitte & Fortune

Environmental issues fell from 14% to just 2%, indicating a significant loss of priority amid economic and geopolitical pressures.

Technology
​

KPMG

83%

of CEOs view Generative AI as critical to long-term competitiveness, but concerns about ethical use persist.

EY

78%

of CEOs are investing heavily in AI to boost efficiencies, though 64% worry about limited impact on revenue.

PwC

70%

of CEOs see AI as a double-edged sword—improving efficiency but creating workforce reskilling challenges.

Deloitte & Fortune

89%

of CEOs are exploring or implementing agentic AI, and nearly two-thirds report GenAI is delivering value. One in ten CEOs expect at least one business function to be fully implemented with agentic AI by year-end.

 


Top Concern ​

KPMG

81%

of CEOs cite geopolitical instability as their primary external disruptor, while inflation and energy transition remain key risks.

EY

77%

worry about political instability and its impact on economic conditions, especially in key markets.

PwC

28%

of CEOs see inflation as their top concern, while macroeconomic volatility (26%), and geopolitical conflict (22%) also remain as significant concerns for CEOs.

Deloitte & Fortune

72%

put geopolitical instability as the top external business disruptor, followed by inflation (44%) and other sources of financial/market instability (40%). Concerns over supply chain disruption also rose significantly to 25%, up from 11% in Summer 2024.

Source: Original Ibec Global based on the results of KPMG 2024 CEO Outlook; EY January 2025 CEO Outlook; PwC 28th Annual Global CEO Survey; Fortune/Deloitte CEO Survey: Spring 2025.