2025 is a new year, and the global economy is heating up especially with Trump back in business.
Let’s explore key risks and opportunities in 2025.
This article was written by a Financial Horse Contributor.
1. Confidence regarding the global economy is falling
According to the Q4 Global Economic Conditions Survey of over 1,800 finance professionals, global confidence has declined markedly at the end of 2024.
Confidence fell very sharply in Western Europe but rose in the U.S.
Confidence in Western Europe is at its thirdlowest on record, only having been lower amid the onset of the pandemic and after Russia’s invasion of Ukraine. It is particularly depressed in the UK, amid the announcement of large tax rises for employers.
The economic recoveries in the euro area and UK appear to be flagging, and the possibility of tariffs on exports to the U.S. adds additional risks.
Confidence in the Asia Pacific has also declined, with a weak Chinese economy and the threat of US tariffs likely weighing on snetiment.
In contrast, confidence actually rose again in the U.S., as the economy entered 2025 on a firm footing.
2. Economy remains the top risk
The economy remained the highest risk among the surveyed professionals.
As the new administration takes over in the U.S. and different trade and political uncertainties continue to dampen confidence around the world, the economy is still seen as the top risk priority.
Top ranked risk priorities:
- Economic inflation / recession / interest rates
- Talent scarcity / skills gapos / employee retention
- Regulatory / compliance / legal
- Technology / data / cybersecurity
- International and geopolitical instability
Financial services respondents ranked regulatory change as their top risk priority for the fourth consecutive quarter.
The economy, cybersecurity and talent scarcity were in tight second, third and fourth places, respectively.
Financial professionals globally are increasingly concerned about identifying and preventing fraud, cyber risks and other corrupt practices.
Scarcity of skills and talent was mentioned as a top risk priority across all sectors and regions.
There are also noteworthy regional nuances.
Central and Eastern Europe was the only region to rank cybersecurity as its highest risk priority, while Asia Pacific and Western Europe ranked talent scarcity highest.
South Asia and North America also stood out for keeping geopolitics in their top three spots.
3. Uncertainty is the order of the day in 2025
According to ACCA’s global economic outlook report, by far the most consequential event for the 2025 global economy was the election of President Trump for a second term as US president.
Key for the US and global economies is clearly the timing and extent to which President Trump follows through on his campaign promises and rhetoric, particularly the less business friendly ones such as tariffs and tighter immigration policies.
It has typically been suggested that President Trump should be taken seriously but not literally, hence it seems broadly reasonable to assume that some of his rhetoric represents bargaining strategies and starting points in negotiations, where he will be open to reaching deals and compromises, as in his first term.
Other downside risks come from the challenging geopolitical backdrop.
JPMorganChase CEO Jamie Dimon recently suggested that ‘… geopolitical conditions remain the most dangerous and complicated since World War II’ (JPMorganChase 2025) – and from rising populism and heightened political uncertainty in key countries such as Germany, France and South Korea.
Meanwhile, further material increases in US government bond yields and the US dollar, for example due to robust growth and sticky inflation, would put increasing stress on the less robust parts of the global economy, and could reduce the room for manoeuvre for other central banks to cut interest rates to support their economies.
They could also put pressure on other asset classes, such as equities and corporate bonds. Similarly, stickier-than-expected inflation could reduce the potential scope for monetary easing by central banks around the world. It could also force some to tighten policy again
Looking at specific countries, the US should remain the top performer in the developed world.
China’s recovery was quite sluggish in 2024, amid continued weakness in the housing market and depressed consumer confidence, and subdued inflation has raised fears about the potential risks of deflation.
Since late September, however, there has been a pivot towards more aggressive policy easing, and there are some signs that it is beginning to work, and the government still hit its growth target for the year of ‘around 5%’.
Importantly, the key policy meetings in December pointed to further material monetary policy easing in 2025, and more robust fiscal policy support, as the government aims to strengthen domestic demand, including household consumption.
The World Bank Group (2025) and IMF (2025) forecast growth of 4.5% and 4.6% respectively in 2025. This would represent some slowing from the 5% expansion in 2024 but would be still faster than the global average.
A major downside risk is the trade policy of the new US administration, although a sharp rise in tariffs would probably prompt the authorities to enact even more aggressive policy support.
4. US Economy will do well?
ACCA Chief Economist Jonathan Ashworth asks distinguished economist Charles Goodhart about his thoughts on the prospects for the global economy.
My guess, on which I would not place a great deal of weight, is that the US economy will do very well in 2025. Both Europe and the UK will do relatively badly.
Not only will higher US import tariffs be a problem for Europe, but higher US tariffs on imports from China will probably mean that China will want to export more of its goods to Europe, at a time when Germany’s business model is already under extreme stress. As regards the UK, I was very disappointed by Chancellor Reeves’s first budget.
The increase in National Insurance contributions for employers is not a very good way to proceed. It will tend to lower employment and raise inflation at the same time. I had hoped she would shift taxation much more onto land and property, and away from income and profits, which she did not do.
As regards India, it is one of the few countries about which I remain generally optimistic. The current issues with global trade relate to tariffs on goods, but nobody is talking about raising barriers to trade in services. Services are going to be produced more internationally and India will be a beneficiary.
In general, the fiscal positions are terrible everywhere, aren’t they?
The most severe issues are in France, where the situation is serious. It is not clear how it will be resolved, if it is going to be resolved. Taxes are already quite high in France, so they need to cut their expenditures, which is politically extraordinarily difficult.
America has got such power, its exorbitant privilege, that it will be another year or two before people start questioning the sustainability of its government debt.
CFO, Johor Corporation (JCorp), a state-owned investment-holding company based in Johor, Malaysia.
What are your thoughts on the prospects for the global economy in 2025, as well as your own region?
Globally, we expect the economy to maintain a positive outlook, with growth of about 3.2% in 2025. Malaysia is set to grow faster at around 5%–5.5%, supported by strong domestic activity and robust demand across the Asia Pacific region.
Inflation, while rising, is expected to remain manageable at around 3.5%, and interest rates should stay stable at 3%, creating a conducive environment for private sector pending.
Malaysia continues to benefit from a steady influx of investments in data centres, robotics, advanced electronics and other technology-related areas and should continue to benefit from robust demand in the Asia Pacific region. The forthcoming Trump administration introduces uncertainties concerning tariff policies and their potential impact on the global economy.
Nonetheless, Malaysia’s neutral stance may allow it to navigate these geopolitical tensions advantageously, fostering trade and cross-border investment pportunities.
What are the risks and other key challenges facing your organisation in 2025 and beyond?
Supply chain disruption is a risk. Our Food & Restaurants business was hit by disruptions from the war in Ukraine, hence, we have diversified our supply chains and strengthened local and regional ones. We continue to monitor geopolitical developments closely to anticipate potential impacts.
Executive Director, Group CFO and Company Secretary of Hong Kong Technology Venture Company Limited, the largest online shopping marketplace in Hong Kong SAR of China.
What are your thoughts on the prospects for the global economy in 2025, as well as your own region?
Globally, I expect growth to be moderate – not very strong.
It is going to be supported by a gradual improvement in consumer spending amid lower interest rates and a more optimistic employment picture (particularly in the US), as well as the digital transformation, which will boost business productivity, and by the post-COVID recovery and stabilisation of supply chains. That said, geopolitical tensions and uncertainty about international trade policy could complicate the picture.
In Asia Pacific, the outlook is generally quite positive amid resilient domestic consumption in some countries, intra-regional trade flows, and a speedier recovery in the tourism sector.
In Hong Kong SAR, given our strategic position as a gateway to mainland China and as a major finance hub, and with mainland China recently announcing policy stimulus, we are well placed to continue to capitalise on our strengths as long as we maintain regulatory and political stability in the city.
5. AI will become an essential experience
The current economic impact of AI is being driven primarily by hardware, consulting activities, start-up investment, data centre construction and energy use. But to realise the much soughtafter productivity benefits, integration will be key. Real economic benefits are unlikely to come from chatbot-style products.
In this regard, and looking ahead to 2025, AI agents are already being touted as the next productivity breakthrough.
What distinguishes an agent from a chatbot is that rather than being directed step-by-step on how to achieve a user objective, agents can determine the necessary steps themselves, thus acting more autonomously, calling on additional tools where necessary.
This is not simple robotic process automation (RPA). Where RPA is brittle and can falter at minute changes in context or input, agents are flexible; where RPA requires clear and consistent rules, agents can adapt. These advantages come from their basis in probabilistic models, which also remains an Achilles heel.
Agents will deliver a second wind to the AI hype in 2025, but genuine business value may rely on applications that integrate different approaches.
The comparison between agents and RPA makes clear that we are not supplanting but adding to our bag of tools: generative AI is not sufficient in isolation, nor are agents.
Software providers are exploring how to integrate AI functionality, building on access to advanced models or acquiring developers capable of building smaller models suited to their purpose. Figuring out how to integrate these different tools is where real progress resides.
While value has proved elusive thus far, the promise of efficiency has been a strong driver for investment and adoption.
Do you agree with these sentiments? Share in the comments below!