- Article
- Global Research
- General Research Insights
Global Economics Quarterly
- The world is bracing for the impact of proposed changes in US policy…
- …and waiting for action following China’s promises to loosen monetary policy and lift consumer spending
- Given ongoing geopolitical, fiscal and inflation uncertainty, many monetary policy challenges lie ahead
A year of promise
2025 promises to be an interesting year in so many ways: politically, geopolitically, economically, and certainly for policy.
The world is waiting for US policies to unfold once the new Trump administration takes office. China is promising looser monetary and fiscal policy to support growth, particularly consumer spending. Meanwhile, elections in Germany, together with political uncertainty in France, open the path to shifts in Europe, where recent economic data have been disappointing.
But the global economy is still growing – and given the uncertainty about what policies will be delivered, and over what time period, we have made only small adjustments to our growth and inflation forecasts.
2.7%
Global GDP growth forecast for 2025, HSBC
3.4%
Global inflation forecast for 2025, HSBC
We are forecasting average global GDP growth of 2.7% in 2025, with emerging markets expanding at 4.0% and developed markets at 1.7%. We expect US growth of 2.2% as it continues to outperform other major developed economies.
Consumer spending is likely to remain the major engine of growth in 2025. Our economists are even keeping the faith that consumers may finally open their pockets a little wider in Europe and China.
It is fair to say, though, that the distribution of risks around our global growth forecasts is high, and we may revise them more frequently than usual as the policy path ahead becomes clearer.
Trade
Trade is very much in focus as we head into the new year. We have lowered our world export volume forecast for 2025 from 3.5% to 1.9%. This reflects both an apparent softening in the global industrial cycle, and the proposed introduction of new US tariffs. Markets will be watching closely to understand the precise timing and magnitude of tariffs, and how the US’s trading partners might react.
Meanwhile, many economies are seeking new locations for foreign investment and new trade deals, with Latin America having recently received senior leaders from both China and the EU. The latter has finally agreed a trade deal with the region’s Mercosur group, and the UK has officially joined the CPTPP free trade agreement with a number of Pacific nations.
Inflation and central banks
We have also made a modest revision to our global inflation forecast for 2025 to 3.4%, up from 3.3%. It is fair to say that the global inflation story has become somewhat more diverse. The disinflation process has seemingly stalled in many places as the “easy” downward pressure from falling energy prices and supply chain improvements has waned.
Despite this, we still see scope for rate cuts in many economies in 2025.
Currently, we expect the US Federal Reserve to lower the Fed funds rate to 3.5-3.75% by the end of 2025. In Europe, we see policy rates falling to a trough of 2.25%. And, while the Bank of England looks set to lag others, which have been easing more rapidly, we still think it will ultimately cut rates by more than markets currently anticipate.
Amid so much policy uncertainty, though, the job of central bankers is not getting any easier.
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The following analyst(s), who is(are) primarily responsible for this document, certifies(y) that the opinion(s), views or forecasts expressed herein accurately reflect their personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report: Janet Henry, James Pomeroy, Ryan Wang, Jing Liu, Erin Xin, Lulu Jiang, Taylor Wang, Frederic Neumann, Jun Takazawa, Pranjul Bhandari, Aayushi Chaudhary, Paul Bloxham, Jamie Culling, Jin Choi, Aris Dacanay, Yun Liu, Simon Wells, Stefan Schilbe, Anja Sabine Heimann, Chantana Sam, Fabio Balboni, Elizabeth Martins, Emma Wilks, Agata Urbanska-Giner, Melis Metiner, Simon Williams, Daniel Lavarda, Jose Carlos Sanchez, Joseph Incalcaterra, CFA and Allison Buck
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