A Year of Growth?
This essay is part of our New Year's series on what to expect in 2025, and can be downloaded as one compiled PDF for you to read at your leisure via the download form. Thank you
By Liz Morley, Founding Partner at 5654 & Company
Looking around the world, growth will be a central theme of 2025. But it won’t always be of the economic kind we need.
The Economist Intelligence Unit forecasts GDP will grow by 2.6% in 2025 in developed economies, similar to 2024 but at a slower pace than the ten years prior to COVID-19.
Inflation is expected to fall, though not fast, with prices for agricultural products falling but industrial raw materials rising. The jury is still out on energy prices, with oil and gas being impacted by geopolitical activity and renewables connecting to the grid still relatively slowly.
Economic growth – or the lack of it – is likely to feature at ballot boxes around the world. 2025 will see important elections in Argentina, Australia, Belarus, Bolivia, Canada, Chile, Germany, Japan, Poland and the Philippines, among others. Arguably of greatest interest is the election in Germany. The three-way alliance formed after the 2021 elections was a rarity for Germany and made for an uneasy marriage.
Those campaigns will be informed by the problems that new leaders and coalitions in 2024 are already experiencing - trying to juggle election promises with the challenges of reducing deficits, increasing taxes, cutting spending and boosting growth.
And then there is Trump. With Republicans controlling both Houses and Trump’s ‘friends’ being appointed to key government positions, the world is speculating as to what will happen with trade, tariffs, energy, the environment and defence. What is certain is there will be an increase in protectionism which will reshape global supply chains. A clear sign of this is that Chinese firms are already expanding abroad, to get around trade barriers and to tap new markets.
This could lead to further unwelcome growth in geopolitical instability. US aid to Ukraine is likely to end, and Kyiv will probably be forced to make peace with Russia on terms unfriendly to it and to the EU’s security. And then there is Israel and new escalations in Syria. With Trump in the White House, NATO’s credibility as a deterrent to Russia becomes limited. And there could be more troublemaking by China, Russia, Iran and North Korea - including more meddling in regional powers, like that seen in Sudan.
And then there’s growth in global temperatures. 2025 is the year when worldwide emissions need to peak to keep global warming at 1.5° C. Climate change is a continuing issue which the world must mitigate. National climate pledges (NDCs) will be updated at COP30 in Brazil. The US is going to be an outlier. Trump in power signals a rebound in oil demand in the US.
Emission increases in 2025 will continue from Asia and the Middle East; declines will mostly come from Europe. Interestingly, emissions from China are slowing from 2.8% to 2.1%. China is now leading a clean-tech boom, with adoption of solar panels and grid storage outstripping forecasts.
The world’s population continues to grow in age too. How will countries manage the health needs of the “greys” while increasing their productivity? And how to replace them when fewer babies are being born, especially as immigration remains a political flashpoint in so many countries?
Hopefully, the growth of technology will bring the solutions we need. More than $1trn is being spent on data centres for artificial intelligence. And we are seeing improvements to a vast range of everyday gadgets, including in health and wellbeing, in reducing inequalities, in developing new materials, in future economics and data, in climate action and in clean energy.
Let’s stay hopeful that despite the growth in uncertainty and risk we can expect during 2025, we are on a path to the economic growth we need to overcome both. To speed the course, we know what risks we must manage but we need to be braver, learn to take risk too and grab the opportunities on offer.