Expected Macroeconomic Developments¹

In 2025, the global economy will enter a phase characterized by economic policy uncertainties and geopolitical risks. While the economic policy announcements of the new US government continue to create uncertainty, it remains unclear how far-reaching the planned measures will actually be implemented. The forecast assumes that there will be moderate tariff increases, but not to a degree that will have a massive impact on global trade. Solid economic growth is expected in the USA, which could act as a global anchor of stability. Europe, on the other hand, is likely to continue to struggle with moderate growth momentum in 2025, although the first signs of a slight upturn are becoming visible. In China, the economic recovery remains fragile, despite extensive economic stimulus measures. Global trade growth is likely to be dampened by geopolitical tensions and trade-related uncertainties. Inflation is only falling slowly worldwide. A rapid return to inflation targets is therefore not to be expected, which could underline the need for a longer restrictive monetary policy. Geopolitical conflicts and trade disputes remain significant risk factors.

The European economy is expected to slowly recover from the ongoing weakness in 2025, supported by the ECB’s interest rate cuts. This monetary easing is aimed at stimulating the weak economy, but growth is being held back by structural burdens such as high wage settlements and rising production costs. While inflation rates are likely to fall further in the first half of the year, they could pick up again slightly from the middle of the year due to higher consumer spending and structural inflation drivers such as deglobalization. Even if the economy is expected to pick up slightly over the course of the year, overall economic growth will remain below potential.

The German economy is set for a moderate recovery in 2025. Falling energy prices are providing relief for both companies and private households, and the effect of global interest rate hikes is slowly fading. Nevertheless, the economic recovery is likely to be sluggish. The construction industry is likely to remain under pressure and structural challenges will continue to hamper dynamic growth. Overall, a limited upturn is expected in the coming year.

Economic development in the USA in 2025 will be significantly influenced by the political agenda of the new administration. President Trump’s focus on protectionist measures such as higher tariffs and a more restrictive immigration policy could stimulate growth in the short term, but fuel inflation and put pressure on international trade relations. At the same time, tax relief and deregulation are likely to stimulate investment, while possible countermeasures by other countries could dampen growth. Inflation remains a key issue, particularly as wages continue to rise significantly. Although the overall inflation rate has eased recently, core inflation is proving tough, particularly in the service sector. The Fed will probably limit its interest rate cuts, even if political pressure for a looser monetary policy is likely to increase.

Following a slight interest rate hike in 2024, the Japanese central bank is expected to continue its cautious tightening of monetary policy in 2025. The inflation rate has approached the target value of 2% during this period, allowing the central bank to continue to maintain a cautious balance between economic stimulus and price stability. The depreciation of the yen has strengthened the competitiveness of Japanese companies and stimulated the tourism sector, which is expected to further boost the economy in 2025.

The economic outlook for the emerging markets in 2025 is mixed, influenced by internal structural problems and external uncertainties. China’s economic growth will remain under pressure in 2025 as ongoing trade tensions with the US and increasing geopolitical uncertainties weigh on export markets. The expansion of import tariffs on Chinese products and restrictions on high-tech deliveries are further complicating the situation. At the same time, China is struggling with the consequences of many years of misallocation of resources in the real estate sector and the high level of debt of regional governments. Although the Chinese government is attempting to support the economy through targeted investments in strategic sectors such as green technologies and biotechnology, these measures are not enough to compensate for the weaknesses in the domestic economy. Brazil’s economy showed remarkable resilience in 2024. Moderate growth is expected for 2025, supported by a continued accommodative monetary policy and structural reforms. Nevertheless, geopolitical tensions and uncertainties in global demand could have a negative impact on economic development. With the increasing relocation of global supply chains and the pursuit of diversified production locations, Southeast Asian emerging markets are positioning themselves as attractive alternatives. Investments in education and infrastructure as well as reforms to improve the business climate are strengthening their role in the global economy. The Indian economy is likely to continue its growth trajectory, supported by structural reforms and increasing integration into global value chains, which will strengthen export performance. The Middle East faces a number of challenges in 2025. The region could be affected by an expected global oil oversupply, which could push oil prices to a five-year low. This could affect the revenues of oil-producing countries. At the same time, the geopolitical situation remains tense, which increases economic uncertainty.

¹ Commerzbank Research - Chartbook January / February 2025.