BusinessAM looks ahead op 2025
2024 is almost coming to an end. That is why at BusinessAM we look ahead to the new year together with experts from the financial and economic world during the last weeks of 2024. How will the American and European economies perform in 2025? And what can we expect from bitcoin and other crypto coins? These are just a few questions we will address in this series. We will publish an interview every Tuesday until the end of the year.
For our first interview, we spoke with Christofer Govaerts, chief economist at Nagelmackers, about what the impact of Trump’s presidency will be on the global economy.
2025 promises to be quite an uncertain year. In the eurozone, the Germans have to go to the polls again, and in the United States (US) Donald Trump is starting his second term in office. Nevertheless, Christofer Govaerts, chief economist at Nagelmackers, expects the global economy to strengthen further. “The US will be the economic engine of the developed remain in the world.”
Both the eurozone and the US have faced enormous challenges in recent years. Consider, among other things, the sky-high inflation and geopolitical uncertainties in the world. Yet both economies are currently managing to keep their heads above water. According to the latest data from the International Monetary Fund (IMF), growth for the eurozone will amount to 0.8 percent this year. Economic activity in the US will increase by 2.8 percent and the global economy will grow by 3.2 percent.
The US could surprise analysts this year. “The yield curve was inverted (where the short-term interest rate is higher than the long-term interest rate ed.) feared a short-lived American recession, but that scenario ultimately did not materialize,” Govaerts said. “On the contrary, the American plane continues to fly and will remain in the air for some time to come. Growth will probably decline in the coming quarters, but that is certainly not a disaster. A recession in the US therefore seems impossible in the short term.”
And what about the rest of the world?
The IMF also expects green growth figures for the global economy in 2025. Currently, 3.2 percent growth is assumed, which is equal to the (expected) figure for 2024. “Although there are still some uncertainties. We are thinking, among other things, of the impact of Trump’s election victory,” Govaerts explains. For example, the president-elect wants to implement a protectionist policy. “The IMF expects growth in the euro zone to increase to 1.2 percent next year, but that is certainly no guarantee.”
“Europe also faces additional challenges due to some structural problems in the region,” Govaerts continues. Thus, Germany, usually the economic stronghold of the monetary bloc, remains the sick man of Europe. The IMF expects zero growth for that country this year. Next year, German growth will be limited to 0.8 percent.
Trump’s policy could also cause problems in Asia, and in particular for China. The president-elect is considering significantly increasing import tariffs on products from that country. “The IMF assumes growth for China of 4.8 percent in 2024 and 4.5 percent in 2025. But we can place some doubts about the forecast for 2025 because of the uncertainties that will be associated with the Trump administration.” , it sounds. “The country is now taking stimulus measures to support economic growth.” Growth in China has remained below expectations in recent years due to, among other things, a real estate crisis.
India, meanwhile, appears to be benefiting from the malaise in China. Due to the sharp population increase and increasing tensions between China and the US, more and more companies are looking to India. And that is reflected in the growth figures. The IMF expects growth there to reach 7 percent in 2024 and 6.5 percent in 2025.
In the West, economies can now also count on support from central banks. They started lowering interest rates this year. Both the European Central Bank (ECB) and the Federal Reserve have already lowered the policy interest rate by 75 basis points this year. It is expected that they will continue to relax interest rate policy in 2025.
“In both the US and the EU, monetary institutions are convinced that inflation will fall to the desired level next year, i.e. 2 percent,” says Govaerts. “But here too, Trump remains an uncertain factor.”
It cannot be ruled out that government spending could increase significantly under Trump. According to the so-called Penn Wharton Budget Model, the US budget deficit under the Republican could rise to $5.8 trillion, compared to $1.8 trillion today. These immensely high government spending could boost inflation again, which will put pressure on the Fed to keep interest rates at high levels for a while longer.
Higher American interest rates could also have an impact on European interest rate policy. If interest rates in the US rise and those in the EU continue to fall, the euro will come under more pressure. As a result, European consumers, among other things, have to pay more for imported goods from the US. At Nagelmackers they currently assume that the euro will gain strength next year. “In our base case, we expect the euro to be worth $1.15 next year, compared to $1.05 today. Again, this is not a guarantee, as there are a lot of uncertainties in 2025.”
Future Gazing: BusinessAM’s Crystal Ball into 2025
Well, well, well! As the year 2024 stumbles across the finish line like a drunken runner at the office Christmas party, BusinessAM is here to take a peek into the economic cauldron of 2025. It’s time to strap in and fasten your seatbelts; we’re about to enter the financial theme park where volatility meets uncertainty, sprinkled with a touch of hope! So, how will the American and European economies fare when the clock strikes midnight on December 31st? Will Bitcoin make a triumphant return, or is it forever consigned to the ‘bad ideas’ vault next to the Pet Rock? Let’s dig deeper, shall we?
This big, fat diary of economic forecasts kicks off with a tête-à-tête with Christofer Govaerts, the Chief Economist at Nagelmackers, who—just like an over-caffeinated mime—has some insights into how Trump’s triumphant entry into the political ring (again!) might shake things up globally. Spoiler alert: This one’s not a gentle shake; it’s more like a full-on earthquake. Grab your hard hats, people!
2025: A Year of Economic Roller Coasters
2025 promises to be the type of year filled with twists and turns that make a roller coaster ride feel like a pleasant stroll in the park. With elections returning to Germany and Trump’s second term kickstarting in the US, Govaerts is cautiously optimistic. He’s got his binoculars trained on the horizon, and he thinks global economic growth is about to pump some serious iron. “The US will continue to be the engine of the developed world,” he says, a bit like a proud father bragging about his son who just learned to ride a two-wheel bike.
Both sides of the Atlantic have faced more challenges than a reality TV contestant. Inflation rates have shot through the roof like they’re trying to set a Guinness World Record, and geopolitical uncertainties are about as pleasant as a tax audit. But here’s the kicker: The latest figures from the International Monetary Fund (IMF) suggest a smidgen of growth is on the table: a paltry 0.8% for the Eurozone and a more robust 2.8% for the good ol’ US of A. So slap a little “I think I can” sticker on that, and we might just haul ourselves into 2025.
The Great American Gamble
Sipping on the pleasantries of the economic outlook, Govaerts mentions a possible surprise from the US. Apparently, an inverted yield curve—yes, it sounds like a yoga move gone wrong—had folks clutching their pearls over a potential recession. But surprise! The American economy isn’t collapsing in on itself like a poorly made soufflé. It’s still chugging along, remaining airborne despite the turbulent winds. But, like any dramatic soap opera, we can’t help but wonder: will there be a plot twist?
And what’s brewing on the other side of the pond? The IMF forecasts show a hopeful uptick in the Eurozone with growth projected to bounce to 1.2%, albeit with a caution flag raised because, well, Trump. Govaerts warns of potential economic hiccups due to Trump’s penchant for protectionist policies, which might just put a bit of a wrench in the European works, especially for our German friends, who seem to be still working through their post-pandemic hangover with growth stagnating at zero. Ouch!
Asia: The Game of Thrones Edition
Meanwhile, across the Himalayas, China peeks over its shoulder, worried about the American bear growling behind it—or is it just a very loud Trump? As the president-elect thinks about slapping on import tariffs like they’re party invitations, Chinese growth might meet some resistance, even as the IMF cautiously anticipates a cool 4.5% growth in 2025. Spoiler alert: Anything could happen, folks. Think of it as the ultimate cliffhanger in a suspense series where you pray your favorite character isn’t written off next season.
On the flip side, it looks like India might be cleaning up nicely while China stumbles. With tensions rising and businesses relocating, Indian growth is set to sizzle at around 6.5% in 2025. It’s like watching one sibling thrive while the other mopes in their room! Now that’s sibling rivalry at its finest.
Monetary Policy Follies: Will the Central Banks Hold the Fort?
As we turn our attention toward the central bank circus, lowering interest rates appears to be the theme of the year. The European Central Bank (ECB) and the Federal Reserve are expected to keep loosening the monetary strings in a bid to keep everything unless Trump throws his tantrums, pushing central banks into a corner. They’re essentially praying for inflation to fall back to the desired level of around 2%—you know, before it decides to run off with a half-baked idea. That runaway government spending under Trump could land us in a precarious spot, with budget deficits ballooning faster than your uncle after Thanksgiving dinner.
But wait—there’s more! If the US decides to hike interest rates while Europe keeps falling, the euro might just get squished and consumers will have to cough up more for burgers and beer. Cheers to that! At Nagelmackers, they predict the euro will strengthen to about $1.15 next year, but let’s remember—the crystal ball has a tendency to fog up when it comes to looking ahead. Uncertainties abound, like a dozen cats on a hot tin roof.
The Verdict: Hang On, It’s Gonna Get Bumpy!
So, what’s the takeaway from all this bonkers information? If you think navigating the next year will be smooth sailing, well, you might want to check your GPS—it’s going to be a wild ride, and you may just find yourself on a detour that no one ever saw coming. Buckle up, 2025—let the roller coaster begin!
BusinessAM looks ahead op 2025
As 2024 draws to a close, BusinessAM is turning its gaze towards the financial and economic landscape of the new year, collaborating with seasoned experts during these final weeks of the year. Key questions include: How will the economies of the United States and Europe fare in 2025? What can investors anticipate regarding bitcoin and the broader spectrum of cryptocurrencies? These pivotal topics will be explored throughout this insightful series. Our informative interviews will be published every Tuesday until the year comes to an end.
In our inaugural interview, we connected with Christofer Govaerts, the chief economist at Nagelmackers, who shared his expert insights on the potential implications of Trump’s presidency for the global economy.
2025 is shaping up to be a year filled with uncertainty and pivotal events. With Germany approaching its elections and Donald Trump poised to embark on his second term as President of the United States, geopolitical dynamics are expected to shift. Nevertheless, Christofer Govaerts predicts a continuation of growth for the global economy. “The US is expected to serve as the economic engine of developed nations,” he asserts.
Both the eurozone and US have wrestled with significant economic hurdles in recent times, grappling with surging inflation and geopolitical turmoil. However, both economic regions have managed to maintain stability. The latest figures from the International Monetary Fund (IMF) project a modest growth rate of 0.8 percent for the eurozone this year, while the US economy is anticipated to expand by a robust 2.8 percent, contributing to a global economic growth of 3.2 percent.
Analysts are left reassessing their predictions for the US economy this year. “Initially, the inverted yield curve (where short-term interest rates surpass long-term rates) raised concerns about a potential swift recession, but this outcome has not prevailed,” Govaerts notes. “In fact, the US economy shows signs of resilience and is expected to sustain this momentum for the foreseeable future. Although growth may temper in upcoming quarters, the prospect of a recession in the short term appears unlikely.”
And what about the rest of the world?
According to the IMF, the global economy is projected to experience favorable growth figures in 2025, maintaining the anticipated 3.2 percent growth rate from this year. “However, some uncertainties linger,” Govaerts remarks, specifically referencing the potential ramifications of Trump’s imminent election. His proposed protectionist policies could significantly impact international trade dynamics. “Growth in the eurozone is forecasted to increase to 1.2 percent in 2025, but this remains an uncertain projection.”
“Europe is confronting additional obstacles stemming from enduring structural issues within the region,” Govaerts elaborates. Germany, traditionally seen as the powerhouse of Europe, continues to struggle, with the IMF forecasting stagnant growth of zero percent for this year. The anticipated growth for Germany in the following year is limited to just 0.8 percent.
Trump’s administration may also induce challenges in Asia, notably affecting China. The president-elect is contemplating substantial hikes in import tariffs on Chinese goods. “The IMF predicts growth rates of 4.8 percent for China in 2024 and 4.5 percent in 2025. However, the accuracy of the 2025 forecast is seriously questioned due to the uncertainties associated with Trump’s policies,” Govaerts adds. “Moreover, China is currently enacting stimulus measures to bolster its economic performance.” Chinese growth has lagged behind expectations in recent years, hindered by a real estate crisis.
Contrarily, India is reaping benefits from the challenges faced by China. The surging population and escalating tensions between China and the US are prompting more businesses to turn toward India, subsequently reflecting positively in its economic growth metrics. The IMF estimates a remarkable growth rate of 7 percent for India in 2024, followed by a robust 6.5 percent growth in 2025.
In the Western economies, support from central banks is also on the horizon, as they have commenced lowering interest rates this year. Both the Federal Reserve and the European Central Bank (ECB) have each reduced their policy interest rates by 75 basis points. It is projected that this trend of easing monetary policy will persist into 2025.
“Monetary authorities in the US and EU are optimistic that inflation will stabilize at the target level of 2 percent next year,” notes Govaerts. “Yet, the influence of Trump’s policies remains an unpredictable element in this equation.”
Increased government spending under Trump could lead to a significant rise in the budget deficit, potentially skyrocketing to $5.8 trillion from the current $1.8 trillion, according to the Penn Wharton Budget Model. Such a dramatic escalation in government expenditure could reignite inflation pressures, challenging the Federal Reserve’s efforts to maintain low-interest rates.
Moreover, higher interest rates in the US could ripple through to European financial strategies. Should interest rates rise in the US while remaining low in Europe, the euro could face downward pressure, making imports from the US more expensive for European consumers. At Nagelmackers, projections indicate that the euro may strengthen, anticipated to reach $1.15 next year, up from $1.05 today, but with caution, as many uncertainties loom over 2025.
What factors are driving the anticipated 6.5% growth of the Indian economy in 2025?
E Indian economy is anticipated to grow at a robust rate of around 6.5% in 2025, fueled by business relocations and increasing foreign investments as companies look to diversify their supply chains amidst ongoing tensions between the US and China. This shift represents a significant opportunity for India, allowing it to position itself as a favorable destination for global businesses seeking stability and growth.
Central Banks and Interest Rate Dynamics
Turning our attention back to monetary policy, the central banks in both the US and Europe are expected to navigate a complex landscape as they consider lowering interest rates to foster economic growth. The Federal Reserve and the European Central Bank (ECB) may be compelled to maintain accommodative monetary policies in response to inflationary pressures and market conditions. However, this could create a divergence in monetary policies, where the US may raise rates while Europe holds steady or lowers them, potentially leading to fluctuations in currency values and additional strain on international markets.
With Trump at the helm, the risk of heightened market volatility remains ever-present. His administration is likely to push for policies that prioritize American businesses, which could lead to retaliatory measures from other countries and further complicate trade relationships. The euro, while projected to strengthen slightly to around $1.15, could still fall victim to these economic tensions, exacerbating the challenges faced by European consumers and businesses alike.
Looking Ahead: The Road to 2025
As we peer into the crystal ball for 2025, the picture is one of both opportunity and uncertainty. The resilience of the US economy may serve as a fulcrum for global growth, but geopolitical shifts and policy decisions by a Trump-led administration are likely to pose challenges both at home and abroad. In Europe, while the outlook for modest growth exists, underlying structural issues—particularly in Germany—could impede broader regional recovery.
In Asia, the dynamics of competition between China and India will be compelling to monitor, with India’s promising growth rate indicating a significant shift in regional economic power dynamics. If current trends continue, India could emerge not only as a regional powerhouse but also as a counterbalance to Chinese hegemony in Asia.
the global economic landscape for 2025 is set to be a thrilling narrative filled with twists and turns. From potential trade wars to stimulus measures, navigating these waters will require astute awareness from policymakers, businesses, and investors alike. As we await the unfolding events of 2025, one thing is certain: it’s going to be a wild and unpredictable ride!
