As 2025 approaches, businesses face a unique mix of opportunities and challenges. While global growth is expected to maintain a steady pace – around 2.8% annually until 2026 – there are still important regional and economic nuances that companies will need to consider in their strategic plans.
Let’s walk through five key economic trends and explore what they might mean for your business.
After years of high inflation, there’s some good news: inflation rates are expected to settle at 2% by mid-2025. This shift should allow central banks to lower interest rates gradually, easing business costs and opening new doors for investments. If your business has struggled with tight budgets and squeezed profits due to high inflation, this stabilization could bring a breath of fresh air.
This is particularly welcome for sectors like manufacturing and transportation, which are sensitive to energy costs. Oil prices are projected to stay under US$80 per barrel until 2026. This stability can make budgeting easier and help with financial planning.
Emerging markets may benefit as well. With lower inflation and interest rates, these economies could attract more investment, offering new avenues for growth. Overall, easing inflation can create a more favorable business environment.
Global growth may be steady, but it’s not uniform. The US continues to be a key driver of the global economy. President-elect Donald Trump’s victory in the US election has not significantly impacted the country’s growth forecasts – the economy is projected to grow 1.9% in 2025 and 2.3% in 2026. Strong household savings and solid corporate finances are helping the US aim for a "soft landing", avoiding a severe recession.
However, slower wage growth in the US could lead to reduced consumer spending. If your business operates in consumer-facing sectors like retail, adjusting your strategies to stay competitive may be necessary.
In Europe, the outlook is mixed. Growth is gradually improving, with a 1.34% increase expected for 2025-26, but Germany's recession will not end until late-2024 and continue to affect the region. Supply chain disruptions and decreased demand from Germany may have ripple effects throughout Europe. On the positive side, lower inflation and supportive monetary policies could create opportunities in certain markets.
China is facing challenges due to a real estate crisis that the government is working to manage. While growth is expected to reach around 5% in 2024, and 4.6% and 4.2% in 2025 and 2026 respectively, the situation calls for cautious optimism. If you're considering expanding or operating in China, it might be wise to focus on specific sectors less affected by these issues.
For businesses, a one-size-fits-all strategy won’t cut it. Success in 2025 will likely require tailoring strategies to fit the unique conditions of each region.
Government budgets are stretched, and in response austerity and stricter fiscal policies are on the way, particularly in the US and Europe. Tax hikes are likely, as well as higher financing costs as central banks continue tightening policies. These changes could affect corporate spending, and your business may want to consider sectors or regions with more favorable fiscal policies.
For example, France may raise corporate taxes to address budget shortfalls. Additionally, quantitative tightening by the European Central Bank could lead to higher borrowing costs for businesses. In the US, similar fiscal tightening could result in increased taxes and reduced government spending. This environment might affect your business by raising operational costs and influencing consumer spending habits.
To prepare, consider planning for higher taxes and exploring regions or sectors that are likely to be less impacted. Engaging in proactive tax planning and financial management can help mitigate some of these challenges.
Corporate insolvencies are on the rise, with an expected increase of 11% in 2024 and an additional 2% in 2025. Sectors like retail and energy are particularly affected due to high costs and changing consumer behaviors.
The US is accelerating, with a 28% year-on-year increase in insolvencies recorded for the first three quarters of 2024 and a continued upward trajectory predicted for Q4. Western Europe is experiencing similar trends, especially in countries like the Netherlands, Sweden, Austria, Ireland, and Germany. While emerging markets like Hungary, South Africa, and India remain relatively stable, insolvency levels in Europe and North America have surpassed pre-pandemic levels.
To stay resilient, focus on your business' cash flow management and conduct thorough risk assessments, especially when partnering with businesses in high-risk industries.
Geopolitical uncertainty remains a top concern for businesses with a global footprint. From potential US protectionism to conflicts in regions like Ukraine and the Middle East, these risks could impact supply chains and drive up costs. These uncertainties are predicted to reduce global growth by up to 1.5 percentage points and add one percentage point to inflation.
The return of Donald Trump as president of the US could reignite trade wars, with China and Europe vulnerable. Our experts estimate that US$67bn of exports could be at risk in 2025-26. A renewed, but contained trade war under Trump could see global trade growth slow by 0.6 percentage points, while an all-out trade war, involving 60% tariffs on China and 10% on the rest of the world, could reduce trade growth by as much as 2.4 percentage points.
Diversifying supply chains and staying informed on political developments can help companies navigate this uncertainty. Being adaptable and having contingency plans can help your business respond effectively to changing circumstances.
In an unpredictable economic landscape, having a trusted partner can make all the difference. Allianz Trade offers trade credit insurance solutions designed to help your business manage risks, build resilience, and prepare for growth in 2025 and beyond.