Page 8 - Policy Economic Report - July 2025

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

• Growth in the euro area is projected to slow in 2025, to 0.7 percent, and would average at 0.9 percent
over 2026-27. The recent surge in policy uncertainty and financial volatility, as well as increases in
tariffs on the European Union (EU), are set to prolong the bloc’s economic weakness, holding back a
recovery in investment and trade.

• In Japan, growth is expected to firm from an estimated 0.2 percent in 2024 to 0.7 percent in 2025,
underpinned by a rebound in consumption and the reopening of automobile plants after longer-than-
expected shutdowns last year.

• Growth in Emerging Market & Developing Economies (EMDEs) is expected to slow in 2025, to 3.8
percent, before edging up a touch over 2026- 27, to 3.9 percent. China’s economy is projected to
decelerate with growth forecast to slow from 5 percent in 2024 to 4.5 percent this year. Export growth
is expected to slow as the impact of U.S. tariff increases materializes.

Figure 2: Contributions to Global Growth downgrades in 2025 & 2026 (%)

July 2025 Source- World Bank

Global inflation

• Global inflation is projected to average 2.9 percent in both 2025 and 2026, before easing to 2.5
percent in 2027—in line with the average inflation target.

• The outlook for global inflation has become more uncertain since last year due to a combination of
shocks. Most notably, substantial tariff hikes are set to exert upward pressure on consumer inflation
in key economies by raising prices for imported consumer goods and inputs into production and
redirecting demand toward domestic production that is relatively inelastic in the short run.

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