Economic Environment in 2025¹

The decline in consumer price inflation in 2024 and associated real income gains will support consumer purchasing power in the United States and Europe. Short-term interest rates are also likely to continue falling, at least in the eurozone. However, long-term interest rates, which are crucial for the development of real estate markets and corporate investments, are no longer expected to decline significantly. Fiscal stimulus measures to boost growth are increasingly constrained by the high level of government debt in many countries, which rose considerably during the coronavirus pandemic. Particularly in Europe, the economic challenges of demographic change and effects of the accelerated climate policy transformation on corporate competitiveness and household purchasing power are becoming more pronounced.

Furthermore, the high level of geopolitical and trade policy uncertainty will weigh on consumer and business confidence. In particular, higher import tariffs imposed by the United States and retaliatory measures from trading partners could drive up global inflation and interest rates, thereby dampening economic growth more than assumed in our forecast.

Trends in the global economy in 2025

We anticipate global GDP to grow by 2.6% at around the same rate as in 2024. For the advanced economies, we expect growth to remain largely unchanged at 1.5% overall. The emerging markets are expected to grow by around 4%, as in 2024.

For the European Union (EU), we expect slightly higher GDP growth (2025: +1.2%, 2024: +0.9%). Since leading economic indicators do not point to an imminent recovery in industrial demand, we anticipate subdued growth in EU countries with a high industrial share. For Germany in particular, despite a rise in private household purchasing power, we expect weak growth of only 0.3% following stagnation in 2024. We also expect only slight growth for Italy and France. For Spain, we are forecasting slightly higher growth of just over 2%. Given the overall muted growth environment in western Europe, eastern EU countries are also expected to expand only slightly more than in 2024 (2025: +2.5%, 2024: +1.7%).

For the United Kingdom, we anticipate slightly higher growth (2025: +1.0%, 2024: +0.8%) amid falling interest rates and the increased willingness of private households to spend.

In the United States, we expect economic growth to slow down (2025: +2.0%) following the strong upswing in 2024 (+2.8%). The economic tailwind from falling interest rates and positive wealth effects in private portfolios is expected to fade. Wage growth is also likely to decrease given the slightly weaker labor market. Rising import tariffs could also lead to a renewed increase in consumer price inflation. This is countered by the economic stimulus effects of potential tax cuts and additional investments.

China’s economy is expected to weaken slightly with growth of around 4.5% (2024: +5.0%). While we expect demand for private goods to stabilize further, growth in demand for services is expected to slow, likely resulting in a lower overall growth rate of private consumption. Exports are also expected to grow slightly less than in 2024. Higher import tariffs in the United States represent a risk factor. In 2024, the United States accounted for around 15% of China’s total goods export. However, the impact of rising U.S. tariffs should not be overestimated given that gross exports to the United States account for around 3% of GDP and that trade diversion in response to increasing tariffs will mitigate some effects.

For the other emerging Asian markets, we expect growth to remain largely unchanged (2025: +5.2%, 2024: +5.2%). In the long term, the region will benefit from the diversification of international supply chains and a growing young population with rising incomes. In India, we expect above-average growth of around 6.5%, and for the ASEAN countries consistently high growth of around 4.7%.

For Japan we expect GDP to grow again (2025: +1.1%, 2024: +0.1%). Industrial production is expected to recover slightly following the sharp downturn in the automotive industry and information and communications technologies. In addition, rising incomes are likely to support private household consumption.

In South America, we anticipate higher overall growth (2025: +2.3%, 2024: +2.0%). This growth spurt is primarily attributable to higher expectations for Argentina fueled by declining inflation rates and market liberal reforms. After a decline of 2.9% in Argentina’s GDP in 2024, growth of more than 3% is forecast for 2025. In contrast, Brazil’s growth is expected to slow down, but still remain solid at around 2%.