Economic Outlook - December 2024

Executive Summary

• The global economy remains on track for soft landing, with inflation decreasing without triggering a recession. Global growth is expected to remain modest, with projections of 2.8% for 2025 and 2.9% for 2026. The US continues to demonstrate strong GDP performance, bolstered by factors such as increased labour supply and significant fiscal stimulus. In contrast, the eurozone's growth is projected to be much lower at 0.8%.
• Inflation has continued to move towards central bank targets. Central banks' monetary tightening has successfully reduced inflation without causing a recession in major advanced economies. We anticipate this 'soft landing' to continue, with inflation approaching the 2% target in the eurozone and US by 2025. This outlook is supported by factors such as declining commodity prices, slowing wage growth, and normalized supply chain pressures.
• We forecast global trade growth to be 1.8% in 2024, slightly down from an earlier estimate. For 2025, trade growth is expected to rise to 3.3%. This upward revision is driven by businesses front-loading activities in anticipation of new tariffs. However, trade growth is likely to fall below 3% in 2026 as the impact of these tariffs takes effect. Trade in the eurozone remains weak, especially in manufacturing, while the US and China showing stronger trade growth.
• Advanced economies are expected to grow by 1.9% in 2025, an upward revision. The US economy is showing resilience despite policy uncertainty, with inflation easing and the central bank starting its monetary easing process. The anticipated policy changes from the incoming Trump administration are expected to impact mostly after 2026 and do not significantly alter our 2025 outlook.
• The outlook for emerging market economies (EMEs) is on average stronger than that for advanced economies, but it remains weak by historical standards. We anticipate GDP growth to moderate at 4.0% in 2025 and 3.9% in 2026. This year, many EMEs have experienced a reduction in inflation rates. Most monetary policies are tending towards easing, but potentially shifting investor perceptions present a risk going forward.
• We have identified a more confrontational US administration as the primary downside risk to our baseline forecast. In this 'full-blown Trump' scenario, the new administration is expected to implement major policy changes in the areas of fiscal policy, trade and immigration, that could significantly affect both the US and global outlook.