Enhanced Investment Management Limited Releases Global Economic Outlook 2025

Hong Kong based Enhanced Investment Management Limited has released the global outlook of the economic markets for 2025.

The world economy is moving much more slowly as it enters 2025. After a time of recovery and stabilization from the pandemic and other shocks, new problems, especially a rise in trade barriers, have made growth less likely. The International Monetary Fund (IMF) [https://www.imf.org/en/Publications/WEO/Issues/2024/04/16/world-economic-outlook-april-2024] says that world GDP would only expand by roughly 2.8% in 2025, down from 3.3% last year and significantly below what is normal. The World Bank [https://www.worldbank.org/en/publication/global-economic-prospects] has also cut its forecast. It now thinks that the world economy will only grow by 2.3% in 2025, which would make it the lowest year since 2008 (not counting recessions). This gloomy picture is the result of a slowdown in both advanced and emerging economies. Higher tariffs and uncertainty about policy are two big reasons why activity is slowing down.

This slowdown is happening in both developed and developing markets all across the world. Reuters reports that the return of protectionist policies and uncertainty about geopolitics have impacted trade, investment, and consumer confidence, which makes the global picture less positive. But a global recession is not the most likely outcome. Instead, people expect growth to stay weak for a long time. The world is not going for a recession but for a long time of slow growth, even though growth is slowing down.

According to the IMF, headline inflation is getting close to central bank targets in advanced economies. For example, it is around 2% in the euro area. Core inflation, on the other hand, is still high because of rising service sector prices and wages.

The IMF and World Bank anticipate that the US GDP will expand by between 1.4% to 1.8% in 2025. This is a big drop because of trade tensions, policy uncertainty, and the effects of tighter monetary policy. High interest rates and inflation are making it hard for consumers and businesses to make ends meet. Tariffs on exports are also hurting their chances of success. But the job market is still strong: the U.S. unemployment rate is at 4%, and jobs are still being created. Inflation is slowly moving toward the Fed's 2% target, but core inflation is still high. The Fed has said that it will only drop rates when the evidence shows that it is safe to do so. This could mean that rate cuts won't happen until the end of 2025. The OECD [https://www.oecd.org/economy/unitedstates-economic-snapshot/] says that by 2026, the U.S. deficit might be as high as 8% of GDP because tax cuts and spending initiatives are making the budget gap bigger.

The IMF and OECD say that the eurozone in Europe would barely grow by 0.8-1.0% in 2025. The good news is that unemployment is at an all-time low in several member states, which helps people buy things. Inflation has dropped closer to the ECB's 2% target, which means the bank can think about lowering rates in late 2025. Fiscal policies are changing from ones that make the economy smaller to ones that don't affect it much at all. But outside events, including as the war between Russia and Ukraine and disputes over global trade, are still hurting confidence and exports, especially in economies with a lot of manufacturing, like Germany.

The IMF's Regional Economic Outlook [https://www.imf.org/en/Publications/REO/APAC/Issues/2024/05/01/regional-economic-outlook-apd-may-2024] says that China's economy, which is the second largest in the world, is expected to rise by roughly 4.0% in 2025, down from 5% in 2024. The slowdown is caused by fresh trade problems, mainly new U.S. tariffs, and a housing market that is getting weaker. Beijing is using fiscal stimulus, such subsidies and public spending, to boost domestic demand. Inflation is still low, at 0%, which gives the People's Bank of China freedom to make policies that are easy on the economy.

The World Bank says that growth in Latin America will only be 2.1% in 2025 because of decreased demand from outside the region, tighter global financial conditions, and political uncertainty in the region. After the pandemic, several countries in the area are having a hard time raising productivity and income levels. The World Bank says that if growth rates stay the same, certain nations might not get back to the same level of income they had before COVID for ten years. Sub-Saharan Africa is predicted to expand by 3 to 4 percent, but because the population is growing so quickly, income improvements per person remain small.

Fiscal stimulus is still big in the U.S., but Europe is slowly coming together. Japan is still following policies that encourage growth, and China is increasing public spending to make up for weakness in other countries. At the same time, many developing countries are having trouble with their budgets and paying off their debts, which has led the World Bank to urge for fiscal changes and help from other countries.

The IMF says that the risks of things going wrong are greater. The biggest concerns are trade disputes getting worse, unstable finances, and tensions between countries. The World Bank says that if tariffs went up by 10% over the world, growth may fall by another 0.5%. On the other hand, good news like lower trade tensions, Lenient AI productivity, or stronger-than-expected consumer demand could surprise markets in a good way.

The fiscal approach in all economies shows cautious realism. Some emerging markets have to tighten because of debt constraints, while advanced economies are shifting from stimulus to retrenchment. The IMF says that tailored budgetary support is needed to protect vulnerable groups while keeping credibility.

Downside risks are more likely to happen in the future. The World Bank says that trade disputes that get worse might slow down global GDP by 0.5% if new tariffs are put in place. Geopolitical uncertainty, financial instability, and ongoing inflationary pressures are still major weaknesses.

On the bright side, possible breakthroughs in trade talks, too much savings in developed nations, and productivity improvements from going digital might all improve the global outlook. The IMF notes that countries need to work together on trade, fiscal regulations, and climate investment to get people to trust them again.

About Enhanced Investment Management Limited

Enhanced Investment Management Limited is a collective of professionals dedicated to fostering the financial success of its clients. The company's mission is to create dedicated, bespoke, and personalized financial strategies for each client, taking into account a comprehensive assessment of their goals, aspirations, and concerns.

To learn more, visit https://enhancedinvestments.com/

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