Steady Global Growth Masks Considerable Risks
Policy uncertainty abounds. US trade and immigration policies could have deep global consequences, but we are yet to know the specifics of what is to come. And so, while global forecasts look better, we find only limited solace in that, knowing that there are considerable risks around these projections.
We close the books on 2024 with mixed feelings and some degree of trepidation about what the future holds. Judging purely by the numbers, the global economy outperformed expectations, with growth closer to trend than we thought it would be. And yet, that was very much a function of persistent US outperformance. Much of the rest of the world, including China and Europe, continued to struggle. Structural challenges in both regions require bold remedial policy actions but it is not clear that they are forthcoming.
2024 was a major election year globally; 2025 will be the year of adjusting to policy outcomes following those elections. For Europe, 2025 may matter even more. The need is clear: the region as a whole must do more to help itself. Will its political system rise to the occasion, or is economic pain still deemed not serious enough?
Policy uncertainty abounds. US trade and immigration policies could have deep global consequences, but we are yet to know the specifics of what is to come. And so, while global forecasts look better, we find only limited solace in that, knowing that there are considerable risks around these projections. Unlike this year, when risks were primarily about timing (when will inflation recede enough to facilitate rate cuts?), current risks are more substantive in nature (how will policies actually change?). For now, we simply await clarity. A year when “everything is possible” is a very hard year to forecast!
The best news of 2024 was the deepening disinflation and the broadening monetary easing cycle it facilitated. This was a core call for us, so it is nice to see it materialize. So, while the US didn’t get the full six cuts we predicted in December 2023, we did get four; the ECB delivered the four cuts we expected, and Bank of Canada did even more than we thought it would. The easing cycle continues in 2025: disinflation will be bumpier, but it is not yet dead. The BoJ remains the big exception to the easing trend.
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There's more to this quarterly edition in PDF. Take a look at our World Output and Inflation table – a short and sweet summary of our growth and inflation forecasts for the year and beyond.