The global economic landscape in 2025 will be shaped by geopolitical uncertainties and trade policies, with the United States expected to maintain economic outperformance relative to other major economies.
According to Swiss Re, the US economy began the year with solid job growth and declining unemployment, though the impact of protectionist policies is likely to materialize in the second half of the year.
Swiss Re forecasts US GDP growth to remain above its long-term potential of 1.9% in 2025, despite potential tariff increases targeting China and reciprocal measures from other countries.
Meanwhile, European economic recovery remains sluggish amid trade tensions and structural headwinds, with fiscal policy developments in Germany expected to play a significant role.
In the East, the firm expects China’s economy to grow at 4.6%, supported by ongoing policy intervention, with additional measures likely to be announced at the upcoming National People's Congress.
Swiss Re has said that it views China as a key investment destination, citing the country’s sustained economic growth, even amid external challenges.
The company projects China’s economy to grow by 4.6% in 2025 under its baseline forecast, which assumes additional US tariffs of 10-30% on Chinese exports and selective tariffs of up to 10% on goods from other nations.
Swiss Re projects US inflation to follow a bumpy disinflationary trajectory, maintaining a forecast of 2.5% for 2025 despite an unexpected rise in the Consumer Price Index (CPI) to 3% year-over-year in January.
The firm cites upside risks from rising inflation expectations, higher tariffs, and potential wage pressures due to immigration policies. In the eurozone, recent inflation upticks have been driven by energy base effects rather than underlying price acceleration.
Chinese inflation is projected to decline slightly, with Swiss Re lowering its CPI forecast for the country by 0.2 percentage points due to persistent weak demand. The possibility of a redirection of Chinese excess supply to Europe, following US tariff hikes, along with yuan depreciation, could further suppress eurozone inflation.
Swiss Re also notes that monetary normalization in the US may be delayed, with two interest rate cuts still expected in 2025 - but occurring later in the year due to inflation uncertainty. In the eurozone, 125 basis points in rate cuts are anticipated as weak growth and slowing inflation persist.
The interest rate outlook for the UK remains uncertain, given the combination of higher inflation and weaker economic growth. Meanwhile, the Bank of Japan is the only major central bank expected to raise rates this year.
Swiss Re's baseline scenario anticipates continued US economic outperformance, but global risks remain skewed to the downside. The firm highlights trade war escalation as a potential drag on growth rather than inflation.
Divergence in central bank policies could intensify, driven by varying regional growth and inflation dynamics. Fiscal concerns, particularly in Europe, may also contribute to volatility in bond yields.
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