Kavan Choksi Briefly Discusses the Global Economic Outlook

Global economic activity is likely to maintain modest momentum in the year of 2025. As Kavan Choksi mentions, real GDP growth ideally should remain stable at 3.1%, on par with the expected advance in 2024. The global economic outlook for 2025 may involve strongly desynchronized growth patterns across regions.

Kavan Choksi gives a brief insight into the global economic outlook

In advanced economies, real GDP is projected to grow 1.8% in 2025, up from 1.7% in 2024.  The economic activity in the United States is expected to stay robust, supported by high productivity and solid income. However, real GDP growth may experience a slip from 2.8% in 2024 to 2.2% in 2025. Falling interest rates and steady income growth in Europe may additionally drive strong consumer spending growth, along with a modest rise in investment. In 2025, real GDP growth in the euro area may pick up to 1.3%, thereby surpassing 1% for the very first time in three years.  In Japan, real GDP growth may rebound toward 1.1% driven by a gradual acceleration in consumer spending and real wages.

In line with growth in 2024, emerging markets are expected to grow at 4.1% in 2025. Real GDP growth in mainland China is likely to slow to 4.5% in 2025. Demographic challenges and the structural property sector may restrain economic activity despite monetary and fiscal policy support. India is expected to remain a bright spot, with real GDP growth at about 6.4%. This growth is largely driven by strong domestic demand and public investment. A mildly stronger expansion might be witnessed in Latin America, despite a notable slowdown in growth in Brazil.

As per Kavan Choksi, global inflation is expected to decline at a steady pace over the months, easing from 4.5% in 2024 to 3.5% in 2025. However, it would be still somewhat higher than the 3.1% pace in 2019. Advanced economies have higher odds of bringing inflation control faster in comparison to emerging economies. The term trajectory to price stability, however, might still experience challenges with services and wage inflation in multiple parts of the world. This leads to desynchronized monetary policy responses. The global inflation outlook faces upward risks due to multiple factors, starting from demographic challenges and geopolitical tensions to rising protectionism.

Central banks are expected to proceed with caution, especially in the contemporary landscape that is increasingly subject to supply shocks constraining economic output and driving up inflation. A widespread monetary policy desynchronization is expected in 2025, as central banks respond to diverse domestic and international conditions. When it comes to advanced economies, the Fed is likely to ease policy at a much more gradual pace than the ECB or European Central Bank. On the other hand, the Bank of Japan may tighten policy prudently in the face of a virtuous wage-inflation dynamic.  Certain economies across emerging markets, like Brazil, are faced with resurgent inflationary pressures that can prompt policy tightening. Mainland China additionally shall continue easing policy in order to steer clear of the risk of persistent deflation.