Summary of the Global Economic Outlook for Commonwealth Countries (October 2025)
This report by Dr. Thomas Munthali of the Commonwealth Secretariat outlines the significant economic challenges facing Commonwealth member countries, particularly as they prepare for the commonwealth Finance Ministers Meeting. Here’s a breakdown of the key points:
The core Challenge:
The global economy is facing renewed shocks (trade tensions, shrinking aid, tighter finances, surging debt, climate change) despite a fragile recovery from COVID-19. This is particularly concerning for the 33 small and vulnerable states within the Commonwealth.
Key Risks & Impacts:
* Slowing Global Growth: Forecasts for 2025 have been revised down to 3.1% (from 3.7%), with potential for a 1% GDP reduction globally by 2027 due to geopolitical fragmentation. A worst-case scenario predicts a $5.7 trillion loss (5% of global GDP).
* external Vulnerability: Most Commonwealth countries rely more on trade with the US, Europe, and China than with each other, making them susceptible to disruptions in those economies.
* Declining Aid: Major donor countries (UK,France,US) are cutting aid,while financing needs are increasing,especially for Small island Developing States (where aid represents 26% of total financing).
* High Debt Levels: 8 Commonwealth members have debt exceeding 100% of GDP, and 24 are between 60-100%. Rising borrowing costs exacerbate this issue.
* Trade Contraction: The WTO forecasts a 0.2% contraction in global trade in 2025, impacting small, open economies.Impacts vary – some (Canada, Nigeria) benefit from tariff easing, while others (Malaysia, Singapore) face weaker prospects.
* Fiscal strain: Deficits are widening, limiting development spending, particularly in small states.
* Remittance Risks: A planned US remittance tax in 2026 threatens household incomes in remittance-dependent economies (Tonga, Samoa, Jamaica).
* Falling FDI: Foreign Direct Investment is less than half it’s 2008 peak, hindering long-term growth in countries like South Africa and Nigeria.
* Financial Fragility: Difficulties accessing affordable external borrowing and underdeveloped domestic debt markets limit fiscal versatility.
Overall Message:
While challenges are significant, the report emphasizes the chance for innovation, cooperation, and transformation within the Commonwealth to build resilience and achieve enduring, inclusive growth.
