Key Takeways
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The outlook for 2025 remains uncertain despite last year’s electoral changes. Risks are elevated with US policies potentially impacting global economies negatively, China struggling with manufacturing overcapacity, and emerging markets facing challenges from dollar appreciation and capital outflows.
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US economic growth is expected to be robust due to strong household spending and investment driven by deregulation and tax cuts. Conversely, Europe’s growth will be hindered by industrial challenges and low consumer confidence amid political uncertainty, particularly in France, Germany, and Italy.
- The European automotive industry is experiencing a downturn with stagnant demand and production slowdowns expected to continue into 2025. Emerging economies are also at risk due to dollar appreciation and capital flight exacerbated by Donald Trump’s leadership, endangering the economic stability of debt-laden nations.
What will 2025 look like? Last year’s electoral uncertainty may have been (partly) removed, but the horizon is still far from clear and the risks have rarely seemed so high. in the context of our central scenario we have revised seven country assessments and 20 sector assessments.
What will 2025 look like? Last year’s electoral uncertainty may have been (partly) removed, but the horizon is still far from clear and the risks have rarely seemed so high. While US policy is likely to be detrimental to many of the world’s economies, China continues to be confronted with major manufacturing overcapacity, while many emerging countries are threatened by dollar appreciation and capital outflows. Europe, meanwhile, faces a new challenge with its US ally, adding to its existing problems and already limited budgetary margins.
Against this background and in the context of our central scenario which sees global activity stabilising for the time being, we have revised seven country assessments (4 upgrades and 3 downgrades) and 20 sector assessments (8 upgrades and 12 downgrades).
Transatlantic divergence confirmed
The year 2025 should confirm the divergence between the US economy and the euro area. US growth is expected to be solid thanks to the resilience of US household spending, which is being driven by a robust labour market and the wealth effects of rising property and equity prices. Deregulation and tax cuts promised by President Trump are set to buoy investment.
Data for the graph in .xls file
Conversely, we expect growth in Europe to be limited and be weighed down by challenges in industry and construction. Despite falling inflation, consumer spending is likely to continue to be curbed by a lack of household confidence against a backdrop of political uncertainty in several countries, including France and Germany. Growth is likely to remain weak in these two countries, as well as in Italy, and to slow significantly in Spain.
European car industry runs out of petrol
The European automotive industry experienced a severe slowdown in 2024. Demand for passenger cars stagnated, while production indicators suggest that manufacturing activity is running out of steam in most countries across the region. New registrations posted weak growth of +0.8% y-o-y in 2024, and even recorded a decline of 3% y-o-y in the second half of the year. And 2025 does not bode well either for the European automotive industry, which is likely to be caught between increased competition from China and the uncertainty of the US market, with the threat of customs barriers.
Data for the graph in .xls file
The election of Donald Trump is reshuffling the deck for many emerging countries
Emerging economies are facing a particularly unfavourable new situation in the form of rapid dollar appreciation and massive capital outflows in several countries. Donald Trump’s election has reshaped the global monetary and financial outlook, exacerbating the vulnerabilities of the most fragile economies. These countries, particularly those most indebted to the dollar, risk seeing their economic conditions deteriorate rapidly as a result of higher…
