(Commonwealth)_ Prior to the Commonwealth Finance Ministers’ 13 October 2025 Washington meeting, the destiny of the world economy is fraught with galvanizing opportunities and challenges for member countries. While the world economy continues to grapple with the aftermath of the COVID-19 pandemic, it is encountering a wave of new shocks that are slowing down growth and increasing inequality. These pressures are supplemented for most of the Commonwealth countries, particularly the small and vulnerable ones, by trade shocks, declining aid, rising debt burdens, and climate risk. A few policy reform opportunities, cooperation, and innovation can also shape inclusive and sustainable development.
World growth recovered well from -3.1% in 2020 to 6.3% in 2022 but with a declining trend. Risks associated with financial policy, global political segmentation, and trade tensions have resulted in a reduction of growth projections. In 2025, world growth is projected at 3.1%, down from 3.7% previously, with the risk of fragmentation reducing world GDP by up to 1% by 2027. Even on projections, up to $5.7 trillion is likely to be lost in the next two years, a shock larger than during the 2008 financial crisis or even the COVID-19 one.
The risk is higher for the Commonwealth countries. In spite of the premium intra-CW trade, which stands at 21%, most members are still reliant on US, Europe, and China trade and therefore vulnerable to external shocks. Most of the small states are aid-dependent, with over a quarter of the finances externally aid-based. It is shocking because aid from high-profile donors such as the UK, France, and the US just continues to dwindle. In the meantime, borrowing needs are rising, and the fiscal situation is in a precarious position.
Commonwealth levels of debt are behind the pressures. Eight of them have more than 100% of GDP, and an additional 24 have 60–100%. High debt and rising borrowing costs enhance fiscal risk and lower policy space. These challenges are particularly significant for small island developing states and other vulnerable economies, which are susceptible to periodic natural disasters as well as external economic shocks.
The impacts of the challenges vary. Trade, the largest growth driver, is at an all-time low, and there is the possibility of a likely 0.2% decline in 2025 rather than the earlier projected 3% growth. The small and open economies are exposed to the loss of exports and labor issues, and the larger economies of Canada and Nigeria benefit from the trimming of tariffs. The slowing growth in the rest of the region, including Malaysia and Singapore, is a result of investment risk and declining trade flows.
Budget weaknesses also come under additional strain for highly indebted mini-states with limited scope to fund development spending. Global action is threatened, such as the projected 2026 US remittance tax, which puts the living standards of remittance economy nations of Tonga, Samoa, and Jamaica into jeopardy. The investors’ confidence is also at stake, as foreign direct investment into the emerging markets goes below half of what it was in 2008, putting into question aspirations for growth in economies such as Nigeria and South Africa.
Central banks are becoming more stressed as borrowing is costly and domestic debt markets are inauspicious. Secondary market weaknesses, structural gaps, and thin investor bases of investors keep nations from depending on domestic financing, thus exposing them to foreign shocks. Commonwealth nations experience long-term financial vulnerability and growth prospects being stifled by lacking sole innovation, policy harmonization, and regional coordination.
Confronted with such never-before-encountered challenges, the inherent strength of the Commonwealth’s common institutions, economic linkages, and nodes of cooperation is the basis for resilience. Tap these strengths through simultaneous economic policies, cutting-edge finance instruments, and harmonious development techniques to enable member countries to weather international headwinds and build a more profound lasting economic future.
