London, United Kingdom – As the global economy ushers in a new year, the outlook is clouded with rising geopolitical tensions and economic uncertainties. Major central banks are scrambling to lower interest rates in the wake of the worst inflation shock in recent memory. The economic agenda for the year is likely to be dominated by the second term of President Donald Trump, with global trade tensions mounting as he threatens sweeping tariffs on US imports.
In the midst of this economic turbulence, the British economy is facing challenges with faltering growth and persistent inflationary pressures. Meanwhile, political turmoil grips the largest economies in the eurozone, and Beijing is striving to revive the Chinese economy. Developing countries in the global south are grappling with soaring debt interest payments, adding to the complexity of the global economic landscape.
The key charts providing insights into the economic prospects for 2025 reveal a potentially tumultuous year ahead. Trump’s trade policies are anticipated to escalate into a new phase of global trade battles, with significant implications for the world economy. The impact of Trump’s proposed import tariffs on US imports could have far-reaching consequences on inflation and economic growth.
Central banks worldwide have begun implementing interest rate cuts to address cooling inflation, with a focus on balancing borrowing costs amid inflation concerns. In the UK, the Bank of England’s cautious approach to interest rate adjustments reflects the delicate balance between economic growth and inflation containment. The potential effects of tax hikes and regulatory changes announced by the government are also being closely monitored by investors.
The specter of stagflation looms over the UK economy, with growth slowing down while inflation remains high. Despite initial recovery from a recession, the economy is now facing challenges stemming from faltering consumer and business confidence. Plans for sustained growth in the G7 nations face obstacles, as economic indicators paint a mixed picture for the UK’s economic trajectory.
Employment rates in the UK present a concerning trend, with a significant portion of the population classified as “economically inactive”. Efforts to boost employment and revitalize public services will be a top priority for the government in 2025. Governments globally are grappling with higher borrowing costs, as the era of ultra-low interest rates gives way to a new reality of potential inflation risks and increased deficits.
As financial markets adjust to these economic realities, the need for fiscal prudence and strategic policymaking becomes paramount. The balancing act between stimulating economic growth and managing deficits will be a key challenge for policymakers in the year ahead. The resurgence of bond vigilantes, scrutinizing government borrowing and driving up sovereign borrowing costs, adds another layer of complexity to the economic landscape in 2025.