The FDI angle

  • Gross domestic product (GDP) growth and foreign direct investment (FDI) are linked to varying degrees.
  • The IMF forecasts 3.2% global GDP growth in 2025, stable from 2024.

Why it matters: Growth forecasts are one indicator for a country's investment attractiveness with economic rebounds helping to attract foreign investors.

All economic growth forecasts are closely watched indicators, but come with health warnings: by definition, they may not come to pass. But countries with strong prospects for growth tend to be attractive for investment, because greater economic activity can enable higher returns for companies and investors.

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The global economy is expected to grow by 3.2% in 2025, according to the IMF’s latest biannual outlook, published in October 2024. While on a par with the 3.2% expected this year, the IMF said global growth was “underwhelming” and would remain at 3.1% in 2029, well below the pre-pandemic average.

There have also been notable downward revisions to the IMF’s growth forecasts since its April 2024 outlook with the “balance of risks tilted to the downside” due to potential flare-ups in geopolitical tensions, financial market volatility and problems in China’s property sector. These IMF forecasts were also created before the re-election of Donald Trump as US president, whose protectionist policy proposals are expected to affect exporters to the US and weigh on global growth.

In an otherwise gloomy outlook, however, more than 20 developing economies are expected to grow at more than 6% in 2025.

The country with the highest forecast for GDP growth in 2025 is South Sudan. The IMF currently expects the sub-Saharan African country to grow by 27.2% next year. But this follows a 26.4% GDP contraction in 2024 due to spillovers from an ongoing conflict in neighbouring Sudan.  

The IMF growth projections assume that the war in Sudan will cease by the end of 2024 and that “re-engagement and reconstruction will commence shortly thereafter”. The fund expects Sudan’s GDP growth to be 8.3% in 2025. 

Guyana was the only economy in the Americas to have a 2025 GDP growth forecast of more than 6%. The small country is expected to grow by 14.4% next year due to an oil and gas boom created by a major offshore discovery in 2015 by ExxonMobil and its partners in the Stabroek block. 

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More on IMF and global economic trends:

Yet another fossil fuel producer expected to have show 2025 growth is Libya, where oil production resumed in full in October 2024 after a resolution of a dispute between rival political factions. The North African country’s economy is expected to expand by 13.7% next year, but growth will be more moderate at 4.1% in 2026. 

The IMF expects Senegal’s GDP to grow by 9.3% next year, the highest since data began in 1980, largely due to the West African country recently becoming an oil and gas producer. But this forecast was down from 10.2% predicted six months ago by the IMF, which says its outlook for Senegal’s medium-term growth remains “subject to uncertainty”, according to a December 2023 note.

The Asia-Pacific country expected to grow the most in 2025 is Palau. The small Pacific island economy is forecast to grow by 8.5% next year, lower than the 11.9% predicted by the IMF in April 2024. These projections are due to a recovery of construction activity and international visitors in the tourism-dependent economy after the Covid-19 pandemic left “significant scarring”.

The largest economy and most populous country to have made it into the list was India, which is forecast to grow by 6.5% in 2025. The Chinese special administration of Macau was the only advanced economy to have made it into this analysis, reflecting a recovery in tourism and gaming activities.

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