Description
Global economic growth is projected to continue at its current pace through 2025, with real global GDP increasing 3.2 percent in both 2024 and 2025. But economic growth will vary in advanced economies and emerging markets.
In the United States, real GDP growth is likely to slow to a solid 2.0 percent next year from a brisk 2.8 percent in 2024 and 2.9 percent in 2023. This baseline forecast assumes that current US policy continues with only modest changes, but that could shift depending on the US election results, affecting the US and other economies around the world.
In the euro area, economic activity should increase as lower inflation supports real incomes and the European Central Bank eases interest rates. Japan's economy is likely to grow at a typical pace next year after contracting slightly this year, as earlier fears of a hawkish policy shift have eased. The United Kingdom is likely to see continued muted growth due to fiscal challenges and the lingering effects of Brexit.
India remains the strongest performer among major emerging economies, with robust growth driven by domestic reforms and foreign investment. China faces economic headwinds as fiscal and monetary stimulus have not fully offset weaker consumer demand, a sluggish real estate sector, and reduced foreign investment. Brazil and especially Russia will likely see growth constrained by inflation and monetary tightening in 2025.
Geopolitical factors, including potential US economic policy changes, pose risks to global forecasts. Changes in tariffs and industrial policies in the United States, China, and Europe raise the likelihood of a global trade war, and continued conflict in the Middle East and Russia's war in Ukraine could trigger broader inflationary pressures.
This PIIE Chart is adapted from Karen Dynan's blog post "PIIE projects continued economic expansion as inflation falls, but US election uncertainty looms" and her presentation at the Global Economic Prospects: Fall 2024 event.
